Interest rates

[Tomataheeed]

With the money presses at full tilt, this kind of makes sense (to someone as cynical as me )

 

Everybody in their starting blocks yet, ready for the 'Great Big Bank Run'?

 

Have you got a clean source, or can you elaborate a bit on where these 'noises' came from, to firm this up at all? (or is it just speculation?)

 

As I understand it, its just lending banks even more money over a short/medium term all over again. The gov buys gov bonds from banks ( with money they've just magicked onto a spreadsheet) and then sells them back again in a few years - and the money evapourates again.....its a con trick....or am I being thick?

[Cyclone]

That would be pretty much illegal, the banks have no right to limit your withdrawals in any way.

Unless it was US speculation about US banks I wouldn't give it any credence.

[L00b]

That would be pretty much illegal, the banks have no right to limit your withdrawals in any way

 

I'm dubious too, but remember that the Government can give the banks that right at the stroke of a legislative pen. And the Governement now owns a whole lot of banking. Just a thought.

 

As I understand it, its just lending banks even more money over a short/medium term all over again.The gov buys gov bonds from banks ( with money they've just magicked onto a spreadsheet) and then sells them back again in a few years - and the money evapourates again.....its a con trick....or am I being thick?

 

It appears so. As to why they decided that printing dosh was necessary, as opposed to simply topping up their bail out stipend yet again...

 

What is needed, is L00b's great solution to the global crisis (I claim first dibs, Gordy, ye hear?):

• declare a global bankrupcy to purge all of the toxic stuff once and for all,
  
• everybody starts with a clean slate (and current assets and bank balances),
  
• everybody who buys something pays for it with real money,
  
• any form of financial construct/product other than straightforward credit (mortgage and company loans, mainly) is outlawed,
  
• stock market workings to be legally-limited to trading actual shares in real companies with real assets, and nothing else (none of that mickey-mouse false/future profit-making futures'n'whatever else 'wind money' crap)

[Cyclone]

The money doesn't evaporate, it's in the system from when it's created. It has the effect of devaluing every pound by the % extra that are created.

 

Your solution rewards idiots and punishes the prudent. I don't like it, I have no debt to be wiped clean.

[perplexed]

Interest rate cuts will take a while to work. The problem is that people want instant results. I find the idea that a measure to stave off recession, which doesn't intantly work, is wrong, bizarre. It's going to take more than a week or two! More realistically 18 months to 2 years.

 

On the mortgage front, I was roundly mocked, next door to being called a cretin, for taking a tracker, when everyone I knew was taking a 5% fixed rate because "there was no way interest rates were going to get any lower..."

 

Well they ain't laughing now are they?

 

I'm happy paying my 1.9%...

 

Even better, just checked and it's now 1.4%...Those on fixed rates gambled and lost. Complaining about it is just the same as going into the bookies after the race and wanting your money back when your horse lost.

[L00b]

The money doesn't evaporate, it's in the system from when it's created. It has the effect of devaluing every pound by the % extra that are created.

 

Your solution rewards idiots and punishes the prudent. I don't like it, I have no debt to be wiped clean.

Not sure I understand your point about 'evaporation'

 

At any rate: do you want to solve the problem, or maintain the global quid-pro-quo and just gesticulate while the UK and everybody else sinks in the quagmire?

 

(Note that the pound would not devalue if the solution is globally applied: the same as the pound would not slide so much, if at all, if everybody's money presses were at it, instead of just the UK's)

 

I used to think I did not have debts to be wiped clean either. Until I realised that I actually do: those the Governement has created for me and my descendants in the past 6 months or so. I believe this applies to you as well.

[Tomataheeed]

The money doesn't evaporate, it's in the system from when it's created. It has the effect of devaluing every pound by the % extra that are created.

 

Your solution rewards idiots and punishes the prudent. I don't like it, I have no debt to be wiped clean.

 

I understood that it would evapourate at the end - they would reverse the QE..quatitative squeezing maybe.....its all cobblers though.

 

I think we've got a few more nightmares to be unearthed yet. I think the main reason it isn't all coming out at once is that it would send us into such a spiral, we'd all give up....if they can keep the bad news just dribbling out, they think we'll panic less.

[hillsbro]

It would be better converted to some easily liquidised asset like gold. But you need a fair bit to make trading in gold worthwhile.

 

And of course, the price of the gold etc. also needs to increase. To state the obvious - if you buy gold and it decreases in value you lose capital. And if you sell gold and the price then increases you lose potential capital growth - as Gordon Brown discovered when he sold off 400 tons of the country's gold, only to see the gold price almost treble within 8 years - see http://www.timesonline.co.uk/tol/news/politics/article1655001.ece

 

If inflation is higher than interest rates then money sat in the bank is actually devaluing.

 

I learned this in the mid-1970s. In 1974 I received £4,000 compensation for severe injuries sustained in a road accident that was the other driver's fault. In 1975 the best investment I could make was in Local Authority Bonds, which gave 13¾% tax free - which sounds good, but for part of that year the annual inflation rate topped 20%. So (at a time when I was earning about £34 per week) I was getting poorer at the rate of about £8 per week.

[Cyclone]

Not sure I understand your point about 'evaporation'

 

At any rate: do you want to solve the problem, or maintain the global quid-pro-quo and just gesticulate while the UK and everybody else sinks in the quagmire?

 

(Note that the pound would not devalue if the solution is globally applied: the same as the pound would not slide so much, if at all, if everybody's money presses were at it, instead of just the UK's)

 

I used to think I did not have debts to be wiped clean either. Until I realised that I actually do: those the Governement has created for me and my descendants in the past 6 months or so. I believe this applies to you as well.

 

Those debts are already shared equally, if I understood correctly you were talking about wiping out all debt, in which case the fool who bought a 500k house last week would be given the asset whilst the fool who lent him the money would loose it all.

I on the other hand would neither loose nor gain anything personally, which makes it look rather like you're rewarding fools.

 

What I meant about evaporating was that it won't. That money now exists, as £10 notes (or it will do). They won't be destroyed afterwards, the money stays in the system. It's like a rights issue (on a companies shares) but applied to the £ instead. It devalues every other £ that currently exists.

[Cyclone]

And of course, the price of the gold etc. also needs to increase. To state the obvious - if you buy gold and it decreases in value you lose capital. And if you sell gold and the price then increases you lose potential capital growth - as Gordon Brown discovered when he sold off 400 tons of the country's gold, only to see the gold price almost treble within 8 years - see http://www.timesonline.co.uk/tol/news/politics/article1655001.ece

Yes.

What I meant is that gold right now looks like a fairly good investment, although to be honest we might have missed the boat. The last thing you want to be is the 'me toos' they are invariably the ones who get burned.

 

 

I learned this in the mid-1970s. In 1974 I received £4,000 compensation for severe injuries sustained in a road accident that was the other driver's fault. In 1975 the best investment I could make was in Local Authority Bonds, which gave 13¾% tax free - which sounds good, but for part of that year the annual inflation rate topped 20%. So (at a time when I was earning about £34 per week) I was getting poorer at the rate of about £8 per week.

Pretty crappy isn't it. Of course inflation is measured as a change in the price of things. So if you buy 'things' that can be resold, inflation doesn't touch your investment, even if it's only treading water.