US rescue plan sparks Asian rally

epz_2

Generali wrote: »

Hmmm. The good news seems to be that so far policymakers are managing to avoid the mistakes that could lead to a 30s style depression.

IMO cutting rates deeply and quickly is a good policy response; one of the things that made matters worse in 1929 US and 1990 Japan was the false concern over inflation - the deflationary effects of a credit contraction led recession should easily squeeze out any inflation that's in the system right now. The next big fear has to be the trade stance of some of the US presidential candidates. The last thing the world needs now is protectionism but it plays well to people worrying about their jobs.

arnt most of the inflationary pressures in the uk at least comming from stuff like tax (council tax up 5% on the news), food and energy?

all of those are being caused by factors outside western control and its not like you can skip eating in the same way you can not buy a plasma tv when the economy gets rough.

Generali

epz wrote: »

arnt most of the inflationary pressures in the uk at least comming from stuff like tax (council tax up 5% on the news), food and energy?

all of those are being caused by factors outside western control and its not like you can skip eating in the same way you can not buy a plasma tv when the economy gets rough.

What you say is true, undeniably but ignores a big part of things.

The thing for me is that we may well have a big fat recession about to hit the US. Let's say that happens. What next?

US consumers buy less. So the Chinese produce less. So the Germans sell fewer machine tools. So the Croatians sell fewer holidays. All these peoples' demand for commodities will drop, thus reducing prices. That's the beauty of globalisation, we're all one big economy now.

The thing is, these things take a little time. If I'm right and things are about to go chests up, then inflation will soon be yesterday's news although it won't look like it for a year-18 months.

Have a look at histories of the 2 great modern credit reduction depressions if you want to see where I reckon we're headed - 1930s US and 1990s Japan. If the BoE doesn't cut rates I think that's where the UK ends up. In both cases, the central banks were caught trying to fight inflation when deflation was the real enemy. I think Merv was alluding to this in his speech the other day when he was talking about CPI going above 3% again possibly.

nelly_2

I was reading something that said America had just got one of them consolidation loans off carol vorderman. They hadnt fixed anything they have just spread the payments out