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

PoorDave

SuperV wrote: »

p.s.
You still believe that a miracle will happen and the UK will avoid depression if nothing is done?

I don't think anyone said that

SuperV

Oil price is already doing that - putting family budgets under stress and it will cause a fall in purchasing power. Purchasing power is what causes inflation.

What you propose is like trying to extinguish fire using more petrol.

It will last long. In nineties the price of oil was very small, China's & India's R&D very still in development, US economy strong.

p.s.
And on top of oil is mortgage cost that will go up 20-30% for a lot of families in the next 12 months.

monkeymaster

SuperV wrote: »

Oil price is already doing that - putting family budgets under stress and it will cause a fall in purchasing power. Purchasing power is what causes inflation.

What you propose is like trying to extinguish fire using more petrol.

It will last long. In nineties the price of oil was very small, China's & India's R&D very still in development, US economy strong.

p.s.
And on top of oil is mortgage cost that will go up 20-30% for a lot of families in the next 12 months.

Economic cycles. We've had some good times, now we get some bad times and just have to accept it I'm afraid. It's impossible to have continuous growth - many have tried to manufacture it that way over the years and failed. The bigger the boom, the bigger the bust and we've had quite a big boom. Obviously no one was complaining at the time, least of all Gordon Brown who promised in his 1997 budget speach that there would be no more boom and bust - he should have known better!

Rosemary7391

Cut the rate. If mortgage/other loan rates follow people will continue spending money they don't have. Short term solution - we'll just have farther to fall.

SuperV

))))))))))))

Guys, I don't struggle. In deed, it would be advantageous for us the fall of house prices.

Cut of interest rate is already calculated in the price of pound. And the strength of pound is not in the BoE interest rate but in the strength of economy. If you were right, New Zealand's currency would be the strongest currency due to its high interest rate.

It will be better to have 3-4 years of 5-7% inflation instead of a nasty housing crash that will take banks (with their further losses) down as well, forcing them to increase interest rates. Having houses sold at auctions for cash (remortgage hahaha...) will cut prices even more. That will lead to even more people loosing their homes etc.

30 years ago Labour were in power and there was a nasty oil shock. Just remember what happened then. You want the same again?

SuperV

People and companies are already feeling pain of high transport and heating costs.

p.s.
Sorry, I can't tick "Quote message in reply?" (tech problem?) in a quick reply form.

SuperV

Quote:
"If the Prime Minister wants lower interest rates then all he has to do is to raise the inflation target from 2% to 4% and the Bank could cut interest rates tomorrow.

The problem is that Gordon would lose the next election by even more, and that the economy might take decades to recover ."

China's inflation is 7.7% ...

It is a job for PM to change a way how core inflation is calculated. Very probably he caused house price bubble when he changed it in the past (but the price of oil was much smaller!!),

bigturnip

It is incorrect to say that 'core' inflation is low and overall inflation is only high because of external factors, such as oil, in fact exactly the opposite of this is true. It is cheap Chinese / Indian imports that have been keeping inflation low over the last few years, take out those external factors and inflation would have been much higher. Inflation is rising now because the cheap imports have reached a plateau and are no longer applying downward pressure on inflation.

It's not just Mervin King who makes the decision on interest rates, but a panel of experts with expertise in a wide area of economic activities, I'm sure that between them they are better placed to make these decisions than you or I.

julz1982

Gorgeous_George wrote: »

Why can taxes not be raised to control inflation?

GG

With some taxes that would work, like Income tax, or Capital Gains Tax. But if you raise taxes on VAT or imports or excise duty you will make inflation worse. If something costs £1 now and you increase the tax on it by 5p it costs £1.05 now, so thats 5% inflation straight away!

Inflation = difference in prices now compared to before. You want to see prices the same as or less than before then make VAT 15%. Overnight you will reduce the inflation rate by 2.5% since everything is 2.5% cheaper now.

SuperV

Quote:
"It is incorrect to say that 'core' inflation is low and overall inflation is only high because of external factors, such as oil, in fact exactly the opposite of this is true. It is cheap Chinese / Indian imports that have been keeping inflation low over the last few years, take out those external factors and inflation would have been much higher. Inflation is rising now because the cheap imports have reached a plateau and are no longer applying downward pressure on inflation."

Thank you!!!!

Your point proves that the core British inflation should be used to establish BoE basic interest rate.

If it were done like that in the past, the BoE rate would have been higher and we would have avoided housing market bubble!!!