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MSE News: Bank of England holds base rate and pumps £75bn more into economy

edited 30 November -1 at 1:00AM in Savings & Investments
20 replies 2.9K views
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  • talexusertalexuser Forumite
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    Only on a slightly different slant, the Government is talking about some mechanism of getting loans to small/medium firms who can't get credit.

    I seem to remember that project merlin (bailing out the banks) had some clause that they had targets to loan to small/medium firms in exchange for the bailouts? The last time I saw this reported the banks were under target.

    Why is no-one talking about project merlin anymore if credit is not available for growth? Another example of one way bets for the banks with our money?
  • oldvicaroldvicar Forumite
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    talexuser wrote: »
    Only on a slightly different slant, the Government is talking about some mechanism of getting loans to small/medium firms who can't get credit.

    I seem to remember that project merlin (bailing out the banks) had some clause that they had targets to loan to small/medium firms in exchange for the bailouts? The last time I saw this reported the banks were under target.

    Why is no-one talking about project merlin anymore if credit is not available for growth? Another example of one way bets for the banks with our money?


    I believe it is the case that there is plenty of credit available and that the banks will lend to companies with a decent proposition. Althought the banks are careful, the issue is that enterprises are even more cautious and don't want to borrow anything - thank you v much. British businesses overall have a cash pile they are not investing.
  • nrsqlnrsql Forumite
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    The idea is to devalue sterling.
    Once wages catch up it means that personal debt will be reduced i.e. all those hefty mortgages and credit card debts will be less of a burden.

    The downside is that imports i.e. most of the things we buy will be more expensive.

    Means inflation - so good for those that bought index linked certificates when they were available.
  • oldvicaroldvicar Forumite
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    nrsql wrote: »
    Means inflation - so good for those that bought index linked certificates when they were available.

    Not good, but we'll try to keep our heads above water :j
  • lvaderlvader Forumite
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    I think the point is the 75bn doesnt exist anywhere. They just devalued the sterling pound and gave the money to government. If you own or earn sterling then you just got poorer though it wont register exactly until government gives money to its employees. The other way it will show up more rapidly is if people sell government bonds, nobody is really selling yet but when they do that new money will create higher prices

    75bn only covers about 7 months of government debt which means that even with QE there will be a net purchase of goverment bonds of around £50bn. There will be no extra money going into the economy, they are simply making sure less gets taken out.
  • QE is "the last resort of desperate governments when all other policies have failed".

    Well according to Boy George in 2009 anyway. :rotfl:
  • MiserlyMartinMiserlyMartin Forumite
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    oldvicar wrote: »
    The British Pound has declined heavily against all of the 16 most actively traded currencies this lunchtime, falling over 1% against the Euro and the Dollar in under a minute, as the Bank of England announced that it would resume quantitative easing and purchase government bonds to the value of £75 billion," says exchange rate analyst Adam Solomon at foreign exchange specialists TorFx.:

    Hyperinflation here we come!
  • PincherPincher
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    Hyper-inflation can happen to tin-pot little countries like Israel, Argentina, but never in proper countries like the U.K. I always thought that was a rather precarious assumption.

    Water the gin once, customers start grumbling.
    Water it more, they start leaving.
    The next time you water it, nobody is there to drink it.
  • PincherPincher
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    What I need is for a bank to lend me a million of that £75 billion,
    at 3.99% fixed for 5 years.

    I'll buy two houses at £400k each, using the remainder to pay for stamp duty, fees, refurbishment, etc. and then rent it out at 6% gross yield.

    Inflation will cause

    1. The BOE rate to rise to 15%, but my BTL mortgage will be fixed at 3.99%.

    2. Rent to rise sharply, even though the mortgage payment is fixed.

    3. House prices will rise with wage rises. I sell the house in 2016 for £650k each. Repay principal of £1 million.

    The first couple of years I might lose money, but inflation will soon make this deal profit generating. In fact, the higher the inflation, the greater the profit.
  • steve237steve237 Forumite
    282 posts
    Cardozo wrote: »
    Will/Has this cause/caused any change to the Euro to Pound Exchange rate? If so, how much of a change?

    The US/GB/EU are all currencies going through similar problems, so there doesn't appear to be any fluctuations between currencies. If you were a trader, what would you think might happen next? I wouldn't have a clue.

    We are all looking into a crystall ball (if only it were so easy)
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