Merv

[AtW]

Rates aren't low because the BoE is keeping them low.

No - rates are low because BoE keeps them low _AND_ prepared to print money to back it up.

 

[AtW]

Another example of Merv acting on behalf of his Govt puppetmasters (that's my opinion anyway):

Bank of England governor Mervyn King 'out of touch' , says City - Telegraph

 

[Freamon]

No - rates are low because BoE keeps them low _AND_ prepared to print money to back it up.

How, pray tell, does the BoE keep them low? Do they have a magic wand? Please explain the mechanism by which the BoE controls interest rates.

 

[AtW]

Please explain the mechanism by which the BoE controls interest rates.

A better question would be how Govt who has made BoE "independent" manages to keep rates low to suit their own needs.

The answer to this is hidden in how Monetary Policy Committee (MPC) members who are technically setting the rates are appointed in the first place, don't take my words for it:

"The Bank's Monetary Policy Committee (MPC) is made up of nine members – the Governor, the two Deputy Governors, the Bank's Chief Economist, the Executive Director for Markets and four external members appointed directly by the Chancellor. The appointment of external members is designed to ensure that the MPC benefits from thinking and expertise in addition to that gained inside the Bank of England."

Source: Bank of England | Monetary Policy | Monetary Policy Committee (MPC)

I've seen more independent Soviet Parliament elected directly by the people

 

[Freamon]

A better question would be how Govt who has made BoE "independent" manages to keep rates low to suit their own needs.

The answer to this is hidden in how Monetary Policy Committee (MPC) members who are technically setting the rates are appointed in the first place, don't take my words for it:

"The Bank's Monetary Policy Committee (MPC) is made up of nine members – the Governor, the two Deputy Governors, the Bank's Chief Economist, the Executive Director for Markets and four external members appointed directly by the Chancellor. The appointment of external members is designed to ensure that the MPC benefits from thinking and expertise in addition to that gained inside the Bank of England."

Source: Bank of England | Monetary Policy | Monetary Policy Committee (MPC)

I've seen more independent Soviet Parliament elected directly by the people

But none of this explains how the BoE (or government, if you prefer) controls rates.

Hint: Open market operations - Wikipedia, the free encyclopedia

 

[AtW]

But none of this explains how the BoE (or government, if you prefer) controls rates.

They vote in MPC meeting and set BoE rates. Previously that was enough on its own, now they have to resort to money printing to actually buy gilts directly from Govt (and thus control interest rates paid by UK Govt on gilts and this has got effect on many other things linked to it), or indirectly via banks who'd buy gilts and then sell them back (at an immediate profit) to BoE.

There are other way such as using massive shareholding at banks that were nationalised and using other unwritten leverages on banks that did not (Barclays).

In a country that lives by unwritten constitution such things are to be expected.

In a way BoE put rates so far down that they no longer work as well as before - banks still need to make billions of profits to pay for all those bonuses, but you can bet that as soon as BoE raises rates (next century probably) then everyone will jack up their rates too, apart from savings accounts maybe.

HTH

 

[d000hg]

B0llox. Just most of other stuff on economics that you post.

Beautifully tragically ironic.

 

[AtW]

Beautifully tragically ironic.

Stay out of this kiddo.

 

[d000hg]

Stay out of this kiddo.

Again, hilarious considering the source.

 

[Freamon]

They vote in MPC meeting and set BoE rates. Previously that was enough on its own, now they have to resort to money printing to actually buy gilts directly from Govt (and thus control interest rates paid by UK Govt on gilts and this has got effect on many other things linked to it), or indirectly via banks who'd buy gilts and then sell them back (at an immediate profit) to BoE.

There are other way such as using massive shareholding at banks that were nationalised and using other unwritten leverages on banks that did not (Barclays).

In a country that lives by unwritten constitution such things are to be expected.

In a way BoE put rates so far down that they no longer work as well as before - banks still need to make billions of profits to pay for all those bonuses, but you can bet that as soon as BoE raises rates (next century probably) then everyone will jack up their rates too, apart from savings accounts maybe.

HTH

Nope, sorry, doesn't help at all as you have completely omitted to mention the OMO system which is the BoE's primary method of supposedly "controlling" interest rates. The fact that you mention QE which can only affect long term gilt rates, as opposed to the overnight interbank rate that the BoE claims to "control", just demonstrates your lack of understanding. I even posted a link to the wikipedia page on OMO in my previous post, which you seem to have deliberately ignored.

There's no helping some people.