The graph they have produced says it all. Completely flummoxed by events and attempting a hand-brake turn at speed:
We called for rates to fall much earlier in the year. Now it is too late to avert the worst of the recession. Worse, I now foresee rates having to climb by March to help finance the Government deficit spending and to avert the Pound from falling below Dollar and Euro parity. In the teeth of a recession too. Ouch.
19 comments:
Presumably government debt will be "sold" at a premium to base rate. The rate cuts are to try and help mortgage holders are they not? I don't think there is a significant risk of the economy being flooded with cheap money now that everyone is in deleveraging mode. I for one am taking the opportunity to pay down debt with the money no longer used to pay interest.
BE - me neither, which is why I suggested printing money.
The Govt will pay for its idiocy in the long-term. but this is no time to pay down debt (unless your living well beyond your means); you should be investing while money is cheap as it won't last.
Labour won't reward savers.
What would have been wrong with scrapping the MPC back in 1997 and allowing the markets to set interest rates?
Massive government interference like this has two functions;
1) to make things worse than they otherwise would be
2) to create opportunities for speculators.
Would have been a difficult call earlier in the year as Danny Blanchflower the sole voice to cut on the MPC.
The rate of decline since August September is staggering. Car sales down 45% (private sector) in November.
Motor and homes - to lose one sector may be regarded as unfortunate to lose both disastrous.
2% base rates mean little without liquidity.
JKA
MW- can't disagree. We have LIBOR after all.
JKA - only hard becuse of the terrible stats they use. They need to look at things like CDS market stress, commodities futures - not just historic numbers. This is why they have been so far behind the curve since the credit crunch started. They did well until then, but now the world has changed.
Perfect conditions for taking out a huge mortgage to release some equity on your property and then burying it all in gold, in the sure and certain knowledge that the government is going to bail if it all goes wrong so you can't lose your house.
Anon . Go one one better and bought a
solid gold house.
I'm getting confused now. Are we using the Swedish banking crisis or the Japanese zero interest rate plan?
Or are we doing the USA banking and business rescue package and tax cuts?
Or are we doing all of them at once?
What is happening to LIBOR?
Well, bless my soul
I still think farm land will be a better investment than gold.
CityUnslicker: "you should be investing while money is cheap as it won't last."
Investing? In what? Just about every asset class is declining.
UK gold is now being shipped to the US to support the COMEX fraud.
Demands for delivery are getting more common...............
anon - well that is where you have to call the bottom. bond yields are not falling in price, real estate yields are not, bank savings rates are not falling that much.
Don't pay debt now when if you can get finance you could invest. All sane people invest toward the bottom rather than toward the top.
Eddie George and Gold
“We looked into the abyss if the gold price rose further. A further rise would have taken down one or several trading houses, which might have taken down all the rest in their wake. Therefore, at any price, at any cost, the central banks had to quell the gold price, manage it. It was very difficult to get the gold price under control but we have now succeeded. The U.S. Fed was very active in getting the gold price down. So was the U.K.”
Eddie George, Bank of England, September 1999.
Gold is the nemesis of all Fiat systems.
Fiat systems shills must constantly control the price of gold, to maintain confidence in their system, and hide their own perpetual theft from the taxpayer through perpetual inflation.
From Greespam
“In the absence of the gold standard, there is no way to protect savings from confiscation through inflation. There is no safe store of value. If there were, the government would have to make its holding illegal, as was done in the case of gold. If everyone decided, for example, to convert all his bank deposits to silver or copper or any other good, and thereafter declined to accept checks as payment for goods, bank deposits would lose their purchasing power and government-created bank credit would be worthless as a claim on goods. The financial policy of the welfare state requires that there be no way for the owners of wealth to protect themselves.
This is the shabby secret of the welfare statists’ tirades against gold. Deficit spending is simply a scheme for the confiscation of wealth. Gold stands in the way of this insidious process. It stands as a protector of property rights. If one grasps this, one has no difficulty in understanding the statists’ antagonism toward the gold standard.”
Read Greenspams own remarks on gold in 1966, BEFORE he was appointed head of the Fiat criminal Cartel Fed.
http://www.financialsense.com/metals/greenspan1966.html
Hopefully the Eurozone rate cut might help stabilise the situation, but you'd be brave to bet against parity at some point over the next 6-12 months.
CU, All sane people invest toward the bottom rather than toward the top.
Seems our letters crossed in the post, ;-)
But, while prices for gold may be high now, we are nowhere near the top!
The current crop of morons appointed by OBamy are all part of the problem, - they helped create it.
Brown wants, really wants, to be part of the lunacy, part of the fiat hierarchy.
You can't inflate a balloon with f*cking great holes in it, you got to patch it up first, or better yet, throw it away and get a new one.
Further injections of debt, however well targeted, create diminishing returns of additional GDP, - after a point the returns become negative GDP as the DEBT overwhelms the economy.
Add in a totally unbalanced global trading system and you have a formula for............. KABOOM!
Colonial Script?
Anon - I think we are a way from that; and yet closer than ever before nonetheless.
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