To be angered off by the rubbish interest rates?

[dilemma456]

Message withdrawn

DaddyJ - What "past errors"?

You are mudslingling, hoping some of it will stick. It is a pathetic debate "strategy".

Obviously you can't answer what I say on the subject, some of which you clearly don't even comprehend.

Ask what you don't understand, and I will explain. Then you can argue back, hopefully on the subject this time.

blueshoes - Yes, there would be a minimum purchase amount. However, this amount is not so high as to be inaccessible to retail clients, especially those with a big enough deposit to live off of the interest.

Thanks Cote, that makes sense.

i am angry, i have a teeny bit of money put by that i got from my divorce. This money allows me to tax and insure a car, which i need living in rural devon. I have been meticulous in keeping this little bit of money working for me.

it sucks.

It's not just the savers suffering though.

Yes there are ordinary people who have been able to use this to their financial advantage. I, for one, wouldn't ever have chosen to take up a Tracker mortgage as I've always needed to budget for my mortgage payment. People on Trackers/SVRs took a gamble and it paid off - and I reckon they're in the minority. I'm quite happy with my fixed rate (probably because it ends in Spetember) as it's quite comparable to the fixed rates offered at the moment.

Yes it's pretty annoying. Still, it has certainly stopped me from being all smug about not taking out an interest only mortgage for 5x our salary in 2007. Financial prudence is not what it used to be.

Cote: Past errors - believing that Bill Clinton is to blame for the financial crisis.
And then running off when I presented you with evidence to the contrary.
Go and check the thread..and don't run off again!

Have you done your reading on inflation/interest rates yet?
Do you understand the link?

Here is another very comprehensive opinion piece on QE
and the potential outcomes.
And do read this article from the Independent.

Quote
There are also two major risks. One is that showering the country with £150bn it didn't know it had might prove inflationary. Mr King says he's alert to the possibility and is determined to stop any inflationary surge in its tracks. But will he be able to?
Unquote

And finally, because you clearly need things spelled out to you:
A property bloke who links the thinking on QE/inflation to future interest rates.

Do you understand now?

daddyj! naughty

Isn't ajust a given that this route will eventually raise inflation and ir's?After all this is why they didn't do it first of all as Alastair D said it would lead to inflation.I think the reason people think the rise will be rapid is because the state of the country's finances is in an unprecedented mess and this plan of action has never really worked for other countries in the past.Low IR and extra cash in the system causes wreckless borrowing.An agent local to me had 10 properties go under offer this weekend which means something is afoot

That's the thing..we don't really know -
even Mervyn King admits that he does not know
when the measures will start having an effect.

The reason why I think it will be sooner rather than later
is because Central Banks are under enormous political pressure to 'deliver'
which they can: by printing even more money.

daddyj: I don't think anyone thinks that the policy of quantitative easing does not risk causing inflation in the medium terms. I would add though that unlike the figures being bandied about only £75bn has been committed to date of which £50bn is being used to purchase newly issued gilts so the incremental 'new' money is only actually £25bn which equates to about 0.2% of the money under circulation under the standard M4 definition. The question is whether this risk is worth it to offset the potential downturn - historically, the BoE has said no, but now, with no other options left is has had to resort to this. Faced with a choice between further economic contraction and QE, I think it's made the right and only choice.

A couple of points though. Firstly, as the articles you link to, and has all other commentary notes, future inflation is not a given. It depends on many things, including the speed and shape of recovery, prevailing fiscal policy and how the money created is used and distributed (e.g. saved or consumed). Secondly, a rise in inflation does not necessarily mean a rise in interest rates - there is a correlation clearly, but they do not go hand in hand - whether interest rate go up if inflation appears will depend on economic conditions at the time. Personally, I'd expect the BoE to push up rate when they can to give themselves more levers to pull (up and down) but that's a purely personal view.

Do you think these low rates plus the cash which is being made available will encourage people back into the housing market?I thought at the end of last yr no way but strange things happening in mBrighton

Oh no, I don't necessarily disagree with the BoE's actions.

Your breakdown sounds more reassuring than this sentence in the Independent article:
'If all the £150bn sanctioned is used, it would amount to an increase of 5 per cent in broad money,
and an astonishing 80 per cent increase in base money.'

We are making predictions about the future
so your points re nothing being certain are valid.

cestlavie, what's your prediction btw? U/V/L recovery? Inflation/deflation?
Don't worry, I won't ask for any sources! Just your personal forecast for the next 12 months.

DaddyJ - I told you how it all started and that was with the deregularization of the derivatives market in 1999, which was pushed through by Republican Senator Phil Gramm and signed in by Clinton. That you think this fact is an error on my part only goes to show how out of depth you are on this subject.

I did not say "it was Clinton's fault". I said it was naive and simplistic to say "it's the bankers' fault" when the said bankers have worked within the legal framework. My point was the this legal framework was rendered weak a decade ago which has led to unchecked and irrational valuations, bundling of assets, pricing, etc.

If anyone is interested, losangeles.injuryboard.com/miscellaneous/the-subprime-mess-and-phil-gramm-an-experiment-in-deregulat ion.aspx?googleid=242468 this is the US deregulation I am talking about.

Yes, Cote, I know and this is what I replied here.
You never came back to the thread.

As regards your 'facts', Cote, I need to make two points:

1. If you regard the 1999 Gramm-Leach-Bliley Act - lobbied for by Gramm, signed by Clinton - as the source of all evil

you might want to consider this sentence: 'The banking industry had been seeking the repeal of the 1933 Glass-Steagall Act since the 1980s, if not earlier.' Is it not true that relentless lobbying from the banking industry was behind this piece of legislation?

1. Yours is merely an opinion. Other people have different opinions.

For example, a chap called Adair Turner - current Chairman of the FSA - disagrees with you. Read the paragraph starting with 'Narrow banking and investment banking.' It is far from clear whether a repeal of Gramm-Leach-Bliley is The Answer to all our problems.

Not read all thread.
I too was very pissed off that interest rates had fallen so much as we have always saved and we overpaid the mortgage sometimes even though it was a struggle, to be mortgage free now (very small house in cheap area btw).
So we don't get the reduced borrowing rates, but have our savings rates cut.
Then, I looked out of the window at my 13 year old car, realised that I can get a 3 year old car now for less than half the £££ it was last time I looked in June.
So I'm getting some savings out, buying a half price car, and by my calculations the value of the money I'm about to spend has gone up by 200% in 9 months.
Its not always about the interest rates, its about the actual value of the money you have. At the moment, anyone with money in the bank will find its worth an awful lot more in real terms on cars and houses and other purchases, than it was last summer.
So I'm not beating myself up about it anymore, no point.

daddyJ: that is alarmist use of statistics by The Independent to say the least in (a) choosing the maximum possible cash injection than that actually injected (b) not offsetting this amount by the treasuries issued and (c) choosing a narrow money supply definition. All technically true, but designed to paint a certain sort of picture.

I'd love to know what will happen over the next few months, having consistently failed to guess how bad it would get over the past year or so. My own view is that economics will deteriorate over the rest of the year, in particular consumer spending but that much of that is now priced in, i.e. unlike previously, people, businesses and markets are correctly anticipating falling GDP, consumer spending, reduced credit availability rather than hoping for a sudden improvement and are planning their budgets on this basis. With market expectations falling in line with likely outcomes, the rest of 2009 should become less volatile and deteriorate more slowly and more stably before bottoming out at the back end. Of course, if there is more unexpected bad news (e.g. around banks' exposure) then the volatility will return.

At some point along this time line, I suspect the effect of low interest rates, favourable fiscal measures and QE will all begin to have an effect. The question is then, do they slow the decline and begin to raise growth (and inflation) to normal levels, beginning the long slow road to recovery as monetary and fiscal policy readjusts to encourage prudence use of funds, investment and spending? Or do they have a rapid and cumulative effect such that as confidence returns we see a rush of credit availability and delayed investment/ consumer spending which creates an upwards spiral putting severe pressure on inflation? Or somewhere in between? I've no idea, I'm not sure anyone does. But if I was the BoE and government and been fine tuning and calibrating every financial tool I had to ensure that when recovery begins (maybe early 2010) it is well managed, closely controlled and has a high degree of early intervention.

What do you think?

DaddyJ - Now that I had the time to read through the articles you linked to at 13:45:30:

The first two articles don't say anything supporting your claim that interest rates will rise "soon", like you claimed.

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By DaddyJ on Sat 07-Mar-09 10:01:42
Bide your time, dilemma.
Rates will go up soon.
-------

I didn't read your third article written by "a property bloke" because, frankly, I don't care what "a property bloke" thinks.

As cestlavie said, nobody here is saying "the policy of quantitative easing does not risk causing inflation in the medium term".

Where I said you are wrong is that you think "rates will go up soon".

When signs of inflation do eventually appear, BoE will naturally start raising rates. Cautiously, I imagine, not to prematurely stifle the recovery.

This will all take time. Japan's interest rates stayed at zero for six years. There is reason to think it recession in UK will run its course in a shorter period of time, but still it would not be wise to hold your breath in anticipation of significantly higher rates.

(Is anyone else enjoying CoteDAzur and DaddyJ's handbag fight? Do you think it's like this in the Monetary Policy Committee?)

At least someone is enjoying it. I'm bored out of my wits

I actually studied this stuff, you know. Then worked about a decade as analyst, then fund manager.

It's not very interesting conversation, having to explain Econ 101 only to be told off. I would much prefer to talk to someone like cestlavie who actually knows what she is talking about.

it just all makes me feel a bit thick tbh!!!

Sorry cestlavie. I thought you were another mum.

Nope, another dad!