Interest Rate rises - Discrimination at its finest? Why BoE interest rate rises don't make sense

MattMattMattUK

sevenhills said:

Voyager2002 said:

Most economists believe that the way to deal with inflation is to increase interest rates, and central banks around the world act on that belief.

If money is freely flowing and consumers are spending, inflation will be high. Consumer spending and the M2 money supply is a problem.
We as a country have a massive debt, that money has gone into the economy and fed inflation.
If taxes were to rise, to lower our debt, that would help to lessen money supply.

A better way to restrain inflation would be to place restrictions on unsecured borrowing, credit cards with a maximum total borrowing across all cards of 25% of annual income, abolish overdrafts entirely, restricting loans to a maximum of say 80% of annual income. Combined with restrictions on non-mortgage secured borrowing, hire purchase etc. and with specific categories of products excluded entirely from being allowed to be sold on finance (holidays etc.). 

sevenhills

MattMattMattUK said:

sevenhills said:

Voyager2002 said:

Most economists believe that the way to deal with inflation is to increase interest rates, and central banks around the world act on that belief.

If money is freely flowing and consumers are spending, inflation will be high. Consumer spending and the M2 money supply is a problem.
We as a country have a massive debt, that money has gone into the economy and fed inflation.
If taxes were to rise, to lower our debt, that would help to lessen money supply.

A better way to restrain inflation would be to place restrictions on unsecured borrowing, credit cards with a maximum total borrowing across all cards of 25% of annual income, abolish overdrafts entirely, restricting loans to a maximum of say 80% of annual income. Combined with restrictions on non-mortgage secured borrowing, hire purchase etc. and with specific categories of products excluded entirely from being allowed to be sold on finance (holidays etc.). 

That may be true, but it wouldn't reduce Government debt.

MattMattMattUK

sevenhills said:

MattMattMattUK said:

sevenhills said:

Voyager2002 said:

Most economists believe that the way to deal with inflation is to increase interest rates, and central banks around the world act on that belief.

If money is freely flowing and consumers are spending, inflation will be high. Consumer spending and the M2 money supply is a problem.
We as a country have a massive debt, that money has gone into the economy and fed inflation.
If taxes were to rise, to lower our debt, that would help to lessen money supply.

A better way to restrain inflation would be to place restrictions on unsecured borrowing, credit cards with a maximum total borrowing across all cards of 25% of annual income, abolish overdrafts entirely, restricting loans to a maximum of say 80% of annual income. Combined with restrictions on non-mortgage secured borrowing, hire purchase etc. and with specific categories of products excluded entirely from being allowed to be sold on finance (holidays etc.). 

That may be true, but it wouldn't reduce Government debt.

It would not, I think we do need to seriously look at paying it down, increased taxes and making sure we are no longer borrowing, with investment only allowed for projects which will yield a positive benefit to the exchequer and especially no borrowing for giveaways or day to day spending. 

Nebulous2

Voyager2002 said:

Most economists believe that the way to deal with inflation is to increase interest rates, and central banks around the world act on that belief.

The exception is Turkey, where the newly re-elected president believes that high interest rates cause inflation and so is ordering the central bank to reduce interest rates to combat inflation. We can all watch what happens in Turkey to see whether the approach there works better than that followed in most other countries.

And if you don't like what the Bank of England is doing, why don't you just move to Turkey? I understand that the weather there is delightful this time of year.

An acquaintance found a scheme being touted on a forum for foreigners living in Turkey. Banks in Turkey were paying 20% interest. Deposit £100k, get £20k interest and you could live on it as Turkey had a low cost of living. Retire on £100k and live happily ever after. 

They struggled to understand what I meant when I said "What will your £100k be worth in a years time?"

LunaLater

Nebulous2 said:

Voyager2002 said:

Most economists believe that the way to deal with inflation is to increase interest rates, and central banks around the world act on that belief.

The exception is Turkey, where the newly re-elected president believes that high interest rates cause inflation and so is ordering the central bank to reduce interest rates to combat inflation. We can all watch what happens in Turkey to see whether the approach there works better than that followed in most other countries.

And if you don't like what the Bank of England is doing, why don't you just move to Turkey? I understand that the weather there is delightful this time of year.

An acquaintance found a scheme being touted on a forum for foreigners living in Turkey. Banks in Turkey were paying 20% interest. Deposit £100k, get £20k interest and you could live on it as Turkey had a low cost of living. Retire on £100k and live happily ever after. 

They struggled to understand what I meant when I said "What will your £100k be worth in a years time?"

They were taking deposits and paying interest in GBP? That sounds quite unlikely.

Nebulous2

LunaLater said:

Nebulous2 said:

Voyager2002 said:

Most economists believe that the way to deal with inflation is to increase interest rates, and central banks around the world act on that belief.

The exception is Turkey, where the newly re-elected president believes that high interest rates cause inflation and so is ordering the central bank to reduce interest rates to combat inflation. We can all watch what happens in Turkey to see whether the approach there works better than that followed in most other countries.

And if you don't like what the Bank of England is doing, why don't you just move to Turkey? I understand that the weather there is delightful this time of year.

An acquaintance found a scheme being touted on a forum for foreigners living in Turkey. Banks in Turkey were paying 20% interest. Deposit £100k, get £20k interest and you could live on it as Turkey had a low cost of living. Retire on £100k and live happily ever after. 

They struggled to understand what I meant when I said "What will your £100k be worth in a years time?"

They were taking deposits and paying interest in GBP? That sounds quite unlikely.

No they weren't. 

onomatopoeia99

Nebulous2 said:

They struggled to understand what I meant when I said "What will your £100k be worth in a years time?"

It will be worth £100k in a year's time.  You might not be able to buy as much with it though.

Nebulous2

onomatopoeia99 said:

Nebulous2 said:

They struggled to understand what I meant when I said "What will your £100k be worth in a years time?"

It will be worth £100k in a year's time.  You might not be able to buy as much with it though.

People don't seem to be understanding what I meant.

Trying to be brief clearly didn't work. 

The scheme depended on moving to Turkey, converting your £100k to Turkish Lira and depositing it in a Turkish bank at 20% interest, then living on the interest. 

The issue was currency risk. 20% interest is of limited use if the Lira devalues by 30% and you decide Turkey isn't for you and want your money back. 

It's also of limited use if inflation is at 40%.

A Turkish bank isn't going to offer 20% interest, in pounds, on a GBP deposit.