Interest Rates - BoE should cut them or the governer should go!

SuperV

tonyhamm wrote: »

Only higher interest rates will cure this inflation.
Its easily shown that if people try to spend money because they believe prices will rise - called dis-saving - then the number of transactions of that money increases and inflation rises because the price level rises. And even I have been dissaving.
All this talk about low inflation because of no unions is a fallicy. The rise in union membership and power occured only because prices were rising and people had to protect thier real incomes. Its the amount of unproductive government spending and waste which creates these problems in the economy.
And the power of dissaving? If there is a desire to spend your money twice as much as before because of rising prices - it doubles inflation. Add a government printing money to cover an enormious deficit between taxes and spending on wasteful non-jobs and useless schemes, with a refusal to cut back, and inflation rises further

OK, can you explain what is a bigger problem, inflation or a death of economy?

At the moment high interest rate increases inflation as it dumps economy. Nobody is interested in sterling. Increase it enough - I believe above 10%, probably 15% and sterling will become again sought after currency.

So, increase interest rate enough to make completely irrelevant economy as the only thing that will matter will be land and few buildings and the inflation is cured!

Until somebody starts buying private schools and transporting them away. I mean a complete school: buildings, teachers etc.

What was the name of a bridge that was sold in London? Do you want that to happen again?

p.s.
It seems that you believe that small inflation means good economy. Blimey, China's economy will for sure disappear next year due to much higher inflation? What will the UK do, where will the UK buy toys, mobile phones, computers, furniture, cloths etc...

SuperV

Dan_1976 wrote: »

We need to rough it through this storm. We dont need stamp duty frozen, we dont need help with mortgages we need to be tought a lesson and face what we have got our selves into! Along the way we should boot out Mr Brown and his puppets and start standing up on our own feet. No more following celebs and trying to live like we earn 20k more than we do, no more letting estate agents push prices up and up and no more greed!

It seems that you prefer a "nice" bloody revolution?

TrickyG

SuperV is the dove from above:A . Interesting debate whos right or wrong, we will only find out after the event. There is a case for rate cut, rate same and rate rise
(http://www.bankofengland.co.uk/publications/minutes/mpc/pdf/2008/mpc0808.pdf
Regardless of peoples opinions BOE have made it perfectly clear when it comes to setting interest rates there main aim is to keep inflation low and on target,
as for sterling, not sure what Superv is getting at, the reason the the pound has lost value is because the market has taken a forward looking view that the boe will cut rates in the future.
Regardless of what i think, the boe will do whatever it does, personally i would rather spend my time making the best of whatever environment we are faced with rather than worry about a decision on interest rates, which I have no control over.
SuperV you have some very valid points but unfortunately the majority of those decision makers are hawkish.
it would be interesting for people to back there economic opinions by taking a position in the markets, lets all grow some balls of steel and back our judgments with hard cash or maybe we will have to settle for a fantasy trader comp, after all there is a credit crunch on.
Markets=fear and greed=bubble=crash tulips,30s,blackmonday87,tech,mortgage/houses2008 whats next who knows but learn from this maybe nextime I will make my fortune?

tonyhamm

SuperV wrote: »

OK, can you explain what is a bigger problem, inflation or a death of economy?

At the moment high interest rate increases inflation as it dumps economy. Nobody is interested in sterling. Increase it enough - I believe above 10%, probably 15% and sterling will become again sought after currency.

So, increase interest rate enough to make completely irrelevant economy as the only thing that will matter will be land and few buildings and the inflation is cured!

Until somebody starts buying private schools and transporting them away. I mean a complete school: buildings, teachers etc.

What was the name of a bridge that was sold in London? Do you want that to happen again?

p.s.
It seems that you believe that small inflation means good economy. Blimey, China's economy will for sure disappear next year due to much higher inflation? What will the UK do, where will the UK buy toys, mobile phones, computers, furniture, cloths etc...

There is no such choice, full, but unproductve employment now means a sharp decline in living standards later, and a poltical-economic disaster. Inflation is simple theft, not some sort of job creation scheme, with non-productive jobs robbing the goods produced by honest labour.

This inflation is caused by excessive government expansion and waste with reams of non productive jobs.

The private sector has seen in a huge bubble in all types of property credit, and coupled with massive government spending, this has eventually created a massive inbalance in trade and in the pound.

This bubble is now collapasing under its own weight, (that of lending standards, not interest rates), with a rightful contraction in credit to the types of abuses riding on the back of the one-way property bet. (all the immigrants with forged employment papers, lie-to-buy, non doc loans etc... trying to 'earn' hundreds of thousands overnight by taking huge debts on property which seemingly rises 20% per year for a decade, and then walking away when things go wrong)

The whole originate and securitise model is now dead, and thus, there is no way other than forcing taxpayers to prop up the appalling lending standards and abuses for credit, that credit for property will be lent as freely as it was. Prices will continue to decline back to a single digit multiple of earnings.

People are being squeezed by rising energy bills, rising mortgage bills (property costs), and rising domestic inflation. The solution does not lie in an further expansion of government non-jobs.

The solution lies in raising productivity. I agree higher interest rates alone are not good enough. The welfare state should be revamped so people get accountability over thier own public services, raising thier productivity, with voucher schemes for everything from national health, education, public housing and even poltical parties.

The millions on incapacity benefit should be assessed for what they can do and not what they cannot do. A form of privatisation for the public sector is needed. Taxes need to be cut.

All economic growth is from the creative-destructive process of rising productivity. A home is not a form of wealth creation mechanism. In the past decade the value of property has grown to be worth more than the value of british industry, and many times more than GDP.

By your standards Zimbabwe would be a earthly paradise as it simply creates non jobs and endless inflation.

SuperV

TrickyG wrote: »

SuperV is the dove from above:A . Interesting debate whos right or wrong, we will only find out after the event. There is a case for rate cut, rate same and rate rise
(http://www.bankofengland.co.uk/publications/minutes/mpc/pdf/2008/mpc0808.pdf
Regardless of peoples opinions BOE have made it perfectly clear when it comes to setting interest rates there main aim is to keep inflation low and on target,
as for sterling, not sure what Superv is getting at, the reason the the pound has lost value is because the market has taken a forward looking view that the boe will cut rates in the future.
Regardless of what i think, the boe will do whatever it does, personally i would rather spend my time making the best of whatever environment we are faced with rather than worry about a decision on interest rates, which I have no control over.
SuperV you have some very valid points but unfortunately the majority of those decision makers are hawkish.
it would be interesting for people to back there economic opinions by taking a position in the markets, lets all grow some balls of steel and back our judgments with hard cash or maybe we will have to settle for a fantasy trader comp, after all there is a credit crunch on.
Markets=fear and greed=bubble=crash tulips,30s,blackmonday87,tech,mortgage/houses2008 whats next who knows but learn from this maybe nextime I will make my fortune?

Thank you. I wanted to make a social experiment. Interesting conclusion, Adam Smith lives! As it is proven, his view is not the best for the whole society/economy. But...

Re BoE - inflation is not the only thing they should care when making decisions.

Re sterling:
1) basic interest rate - in my opinion to high - dumps economy, no investment, migrant workers go away and sell sterling etc...
2) economy - going south... will not help sterling...
3) availability of sterling (estimated 100-200 billions of pounds in special BoE loan). OK, ask China, Japan, Russia and South Korea to buy banks and provide cash. Maybe that will happen if the sterling "adjusts" more?! Buying sterling will for sure make it stronger.

p.s.
Check Treasury, documents about index can provide an interesting insight.

SuperV

tonyhamm wrote: »

There is no such choice, full, but unproductve employment now means a sharp decline in living standards later, and a poltical-economic disaster. Inflation is simple theft, not some sort of job creation scheme, with non-productive jobs robbing the goods produced by honest labour.

This inflation is caused by excessive government expansion and waste with reams of non productive jobs.

The private sector has seen in a huge bubble in all types of property credit, and coupled with massive government spending, this has eventually created a massive inbalance in trade and in the pound.

This bubble is now collapasing under its own weight, (that of lending standards, not interest rates), with a rightful contraction in credit to the types of abuses riding on the back of the one-way property bet. (all the immigrants with forged employment papers, lie-to-buy, non doc loans etc... trying to 'earn' hundreds of thousands overnight by taking huge debts on property which seemingly rises 20% per year for a decade, and then walking away when things go wrong)

The whole originate and securitise model is now dead, and thus, there is no way other than forcing taxpayers to prop up the appalling lending standards and abuses for credit, that credit for property will be lent as freely as it was. Prices will continue to decline back to a single digit multiple of earnings.

People are being squeezed by rising energy bills, rising mortgage bills (property costs), and rising domestic inflation. The solution does not lie in an further expansion of government non-jobs.

The solution lies in raising productivity. I agree higher interest rates alone are not good enough. The welfare state should be revamped so people get accountability over thier own public services, raising thier productivity, with voucher schemes for everything from national health, education, public housing and even poltical parties.

The millions on incapacity benefit should be assessed for what they can do and not what they cannot do. A form of privatisation for the public sector is needed. Taxes need to be cut.

All economic growth is from the creative-destructive process of rising productivity. A home is not a form of wealth creation mechanism. In the past decade the value of property has grown to be worth more than the value of british industry, and many times more than GDP.

By your standards Zimbabwe would be a earthly paradise as it simply creates non jobs and endless inflation.

Short answer - you prefer castration (depression), I prefer high temperature (inflation).

p.s.
Re efficiency and tax at least we agree...

tonyhamm

I dont prefer depression. I prefer rising productivity. Inflation means falling productivty and disaster like in Argentina.

SuperV

tonyhamm wrote: »

I dont prefer depression. I prefer rising productivity. Inflation means falling productivty and disaster like in Argentina.

And now in the world of Adam Smith comes panic... you know what will happen because of it.

Argentina is not the right example. Inflation in China is 7% and productivity is rising.

So, it seems that a lot of people prefer castration (depression - just look at those that used to work in industries closed by Maggie) to high temperature (inflation).

SuperV

Quote:"Mervyn King, the Bank of England governor, insisted on Tuesday that the Monetary Policy Committee “has become firmer in its belief” that a period of economic weakness is needed to bring inflation back down.

(http://www.ft.com/cms/s/0/3cc4aee0-83cb-11dd-bf00-000077b07658.html)"

Mr King is not a stupid man. He understands that he completely mismanaged economy and BoE and that he is a cause of many problems - that the interest rate was too low for too long and that it caused housing bubble. He also didn't complaint about ludicrous bonuses until it was late. He is man not fit for the purpose of a Governor of BoE.

But, he doesn't want to go as a man who didn't do his job. He wants to be known as a man who tamed inflation.

So - he decided to kill economy in order to have his legacy. In the same way as Tony has Iraq war.

What a pair of ...

As I stated more than two months ago - Mr King should go!

tonyhamm

King is earning the wrath of this government because he is the only person standing in the way of all sorts of lunatic bailout schemes which would sell not just your future, but your children into slavery by both inflation and taxes to support this mob - including the bankers, thier lunatic losses and fake profits, and artifically try to inflate housing market credit again, which people close to this government, like all the Labour MPs about to lose thier seats are demanding.

For example - Will Hutton (A new labour insider) is constantly popping up on the news and claiming the end of the world is about to occur (utter utter nonsense) - with us all ending up eating worms, or each other, in a doomsday that will be worse than the 1930s depression etc... UNLESS, xxx bank, and its directors are given endless taxpayer bailouts and guarantees, added to the national debt like a banana republic, all to start selling lier loan mortgages again, to get the one way property bet - thie governments 'wealth machine' going again..

Interest rates don't matter - because the extension of credit will never be as mad again, so asset prices must fall to more reasonable levels. In this process, credit must get tighter until sanity in housing is restored. If the BOE cut interest rates to 2%, a run on the pound would occur. .