Carney bottles it.

Discussion in 'Politics & The Economy' started by karkus30, Aug 8, 2013.

  1. karkus30

    karkus30
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    A rather Luke warm announcement from the new Governor of the BoE. A weird logic that states that interest rates won't rise until unemployment gets bellow 7% which would effectively tie his hands and simultaneously give the green light for even more bad investments and poor lending decisions.

    Everyone heard it.

    Then: except in the case that we think inflation is accelerating .....

    Eh? In other words scrap what I said because it means nothing, we are looking at inflation to guide interest rate rises. That of course has always been the policy so we can happily ignore the other one.

    Well no we cant this puts Carney in a fix. Suddenly the windows open and the light floods in. If employment (growth) is the first part of the equation, then how will the bank determine where the growth is coming from ? Is it demand or supply side ? Demand side growth that we had before the great collapse certainly helped employment figures. As it appears Carney doesn't side with Austrian economists then he sees price rises as a natural response to growth and not to an expanded money supply.

    Interesting trap which confirms my suspicion that the BoE is not fit for purpose. Its no more than a sham and a dangerous one at that.

    So, don't worry when inflation goes up, as long as unemployment is coming down its all going according to plan and the BoE won't be putting the brakes on unless of course its an indeterminable 'wrong' type of inflation in which case expect the interest rate rockets to be ignited. Meanwhile Government borrowing goes on unabated and the banks service that.
     
  2. domtheone

    domtheone
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    If all else fails, just carry on with the same.

    Inflation will remain high and many individuals/companies will feel the squeeze from higher costs (fuel etc).

    BOE might as well leave int rates at 0.5% forever since they don't have any other ideas.:rolleyes:

    I hope inflation goes to 5%+ and then we'll see what happens.:devil:

    This decade will be a total w/o.

    Still, i'm planning on buying my first house in the coming months so now I know that stonkingly low mortgage rates will be around forever, there's no rush.
     
  3. karkus30

    karkus30
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    You could move to Spain and buy an entire town and just commute. You could have a different place to stay each night.
     
  4. domtheone

    domtheone
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    Prices may have fallen in Spain a lot but I bet it's still relatively expensive for a Brit given the toilet exchange rate at the moment.:laugh:
     
  5. karkus30

    karkus30
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    Those homes are on someone's balance sheets as a solid investable. You can't go buying them for a few quid or the real value would become apparent. A world economy just build on debt on top of debt on top of debt. Anyway, those piles of bricks and blocks are a stockpile of missiles for the masses once the bill lands so you can't have them.
     
  6. fluxo

    fluxo
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    I must admit it's not very obvious what has changed. Here is the forward guidance document: Bank of England Forward Guidance (PDF)

    From that:

    Which seems very similar to what was expressed in the Chancellor's original 1997 letter to the Bank of England.

    Page 12 of the forward guidance document is worth a read:

    If you look at chart 6, it shows that productivity growth has been negative since 2008. That is, productivity has fallen and it has fallen particularly quickly during the last year or so.
     
  7. karkus30

    karkus30
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    Its a meaningless chart. What it shows is only that money pumping generally results in an upward growth of productivity. Therefore during the cheap money, high lending period the productivity grew. Now that money pumping is no longer flowing into the private sector economy then the mirroring goes the other way.
     
  8. karkus30

    karkus30
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    Seems the market isn't interested in Mark Carney and his forward guidance. As of yesterday interbank swap rates have gone up a full1% to 2.6%. I don't think any more QE trickery is on the cards. Expect mortgages to follow soon. We aren't even in September yet.
     
  9. domtheone

    domtheone
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    I'll be applying for a mortgage within the next 2-6 months so can we hold fire till after then.:laugh:
     
  10. karkus30

    karkus30
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    I reckon they will go up before the end of the year. Possibly two rises.
     
  11. domtheone

    domtheone
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    Mortgage rates, maybe, interest rates, no chance;)

    Every man and his dog in government/BOE (same thing) is addicted to low (negative) interest rates.

    Take an extreme event to trigger a rate rise in the short term.
     
  12. karkus30

    karkus30
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    Uncharted territory. The market is like a tinder box, just one spark can start a firestorm. I cannot see the central banks risking that. In normal conditions yes, but not now.
     
  13. fluxo

    fluxo
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    There's a cabbage in the box.
     
  14. pragmatic

    pragmatic
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    No idea what that means, but it made me laugh :p
     
  15. tapzilla2k

    tapzilla2k
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    I think the sovereign debt crisis has a few more surprises in store for Governments and central banks across the world. The debt held by local Governments in China is one to watch.
     
  16. karkus30

    karkus30
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    Oh yes.
     
  17. fluxo

    fluxo
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    If we don't get hit by a comet, interest rates will probably rise at some point.

    Under what circumstances do you predict this will happen?
     
  18. EarthRod

    EarthRod
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    This might help:

    When will UK interest rates rise? | This is Money

    Predicts 2016, but all depends on unemployment rate.
     
  19. fluxo

    fluxo
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    Thanks for the link. I'm wondering what will happen when other central banks start raising their interest rates. Could that force the BofE to do the same?
     
  20. karkus30

    karkus30
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  21. domtheone

    domtheone
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    Not if your names[-] Merv[/-] Mark:p
     
  22. karkus30

    karkus30
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    As long as its running below 3% they believe they have control. It does make me laugh. Throughout the ages central bankers have believed the same tripe. Its always followed by a moratorium dedicated to discovering why they failed to see the crash coming. The problem is the Central Banks that have been mucking about with the economy in the first place. They have always had their hands on the wheel when the car hit the wall, except its impossible for them to admit complicity. It will always be 'better next time'. Better regulations, more quangos, a different model, new powers. The end of boom and bust is invariable followed by another boom and bust. Be it the bonds market, housing bubbles, tulips, dot.com or whatever else.
     
  23. pragmatic

    pragmatic
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    Whats worse is that it is an arbitrary level, and then they fudge the figures to meet that level.

    Or in other words they have such little confidence in their ability to actually change anything in a positive way they spin to keep themselves in a job.

    Interestingly Carney caused a massive bubble in Canada, but got out just as it got serious, a bit like Gordon, but unlike Gordo, he moved country to avoid any flack.
     
  24. karkus30

    karkus30
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    The central bank has always been a corrupt provider of corporate welfare, the rest is a fairy story. It happens that its links with the state and the mob rule of supposed democracy are interdependent. Getting rid of central banking should be priority for socialists and free marketeers alike.
     

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