Anyone else watching Mervyn King's speech?

Rover

wolvoman wrote: »

Re-inflate might be the wrong way of putting it. What the BoE needs to do is somehow keep economic growth going, engineer a soft landing in the housing market but keep an eye on structural inflation.
This means interest rates at between 3.75% and 4.25% by the end of 2008.

You may aswell add, deliver cleaner nuclear fission and peace on Earth.

PS. How do you contain rising inflation and cut base by 1.5%. See my earlier reply of suffering a long slow remedy.
IMHO, you'll see CPI rise well above target (who know's what real inflation is /will be), base rate's will initially drop then rise. Commercial and residential property prices will slide for 3/4 years. And yes, we'll have a recession of sorts.

What irritates me is during all this, the various banking CEO's who haven't been 'retired' on fat pensions and golden handshakes will still be creaming it in. Hedge funds managers will still get million pound in bonus' and the great unwashed of the British Isles will be paying for it all. Where are the ex board members of NR - signing on are they? All the main movers and shakers that are responsible for our record levels of personal debt will be absolutely fine.
The public purse will drained, all asset values will fall then we'll start again!!

twhurl

Rover wrote: »

You're an idiot. Reinflate the bubble for Christ's sake, I really do despair sometimes.

I'll disregard the gross generalization and knee jerk response. Why can't we just discuss the issues without commenting on any personal attributes.
I agree 'Re-inflate' was a bad choice of words. Obviously the panic and crash scenario has to be stemmed. It will do no one any good. So you need to give people access to credit at reasonable terms but deny the speculative mania by more stringent credit checking.

Pobby

twhurl wrote: »

I'll disregard the gross generalization and knee jerk response. Why can't we just discuss the issues without commenting on any personal attributes.
I agree 'Re-inflate' was a bad choice of words. Obviously the panic and crash scenario has to be stemmed. It will do no one any good. So you need to give people access to credit at reasonable terms but deny the speculative mania by more stringent credit checking.

The very point,I think,is that we are bolting the stable door after the horse has bolted.So much many has been lent in a lax way that has fed the speculators.Now it`s time to get back to more realism.How they will do that I have no idea.The damage has been done as far as I am concerned.

sarkin

aardvaak wrote: »

As a grand old feller once told me people should never complain at paying interest whatever rate it is as in effect you are borrowing someone elses life - they have saved the money in a lifetime!

Have a look at this u tube money has been created out of thin air the banks have been printing IOU's

Rick62

If you have been overspending using borrowed monmey then at some point you have to stop overpending and start underspending in order to finance your debt and then some more to start paying the debt back.

Lets say your income is £50,000 but you spend £55,000 a year, after 10 years you have about £80,000 debts (with interest/charges) so you either get into worse problems or you cut your spending down to £45,000 or less and start reducing you debt. Its called tightening your belt.

Its the same for the country, except the figures are all followed by the word billion and its called a recession. There is no way to avoid it or to have a 'soft landing'.

wolvoman

RHemmings wrote: »

What if inflation takes off, as Merv. himself predicts that it will. No point reducing interest rates in the hope that results in cheaper mortgages if inflation raises living costs elsewhere so that on balance even less money is available to fund mortgages.

But interest rates cannot control a vast amount of what now accounts for upside inflation risks. Oil and it's sub-products (petrol, gas and eventually electricity) are beyond the control of the BoE.

No point having interest rates at 5.5% and CPI at 3% when an interest rate of 4.5% might only have CPI at 3.2% (just an example). The BoE's control on inflation using interest rates is much less significant than normal.

Of course oil prices are now down nearly 15% on their recent highs so perhaps that will mitigate some of the inflationary fears.

poppy10_2

wolvoman wrote: »

Of course oil prices are now down nearly 15% on their recent highs so perhaps that will mitigate some of the inflationary fears.

Gas and leccy are up 15-20%, so perhaps that will drive up inflation?

Generali

As poppy10 and wolvoman allude to, it isn't as simple as to say, the oil price has been rising therefore inflation is about to skyrocket.

If we have a recession (and I think the US one has already started, we'll see if I'm right in about 7 months) then demand for fuel will fall. Demand for Chinese produced goods should fall too which will hit demand for some of the foods and 'hard commodities' they've been bidding up in price. This will all cause prices of these things to fall (unless OPEC turns the taps off of course).

Markets are complex and interrelated and it's a mistake to think that just because the price of something be it a house or a gallon of petrol or a pint of milk has been moving in one direction for a while that it'll keep moving that way indefinitely.

It's all about supply and demand and those things are a function of a billion individual decisions. The Market isn't some being, it's just a bunch of individuals making decisions about which loaf of bread to buy.