Bank of England Governor Sir Mervyn King to issue seventh inflation apology in a row

[AtW]

Read it and weep AtW!

Express.co.uk - Home of the Daily and Sunday Express | UK News :: Mortgage joy for millions

"Kevin Mountford, head of banking at MoneySupermarket.com said: “The likelihood of a base rate cut is greater now. It will bring benefits to borrowers if passed on."

[Gonzo]

It's not only the debt that gets devalued you cretins - salaries ain't going anywhere and 4 years on 5% of inflation is equivalent to additional 20% tax only the money ain't received by the Treasury: such massive fall in living standard is offset somewhat for home owners by keeping BoE rate low, however everyone else is fooked right now and once wage spiral starts (sooner or later) it will be pretty impossible to stop it.

The drop in the standard of living is unfortunately inevitable.

I worry that when the wage spiral comes it will be difficult to reign in, but that will be the time to raise the interest rates which now have plenty of room to move upwards without getting near to the 15% to 20% that some of us can remember from the seventies and the nineties.

Being forced to raise interest rates to stay inside the ERM during the recession of the early nineties made that recession worse than it otherwise would have been. The Bank of England are clearly not intending to repeat that mistake (that doesn't mean that they won't make new ones of course).

EDIT - Of course during the 1990s the central bank interest rates were set by the Treasury, not the Bank of England. It wasn't a BofE mistake then, but it is a mistake that it is now the BofE's responsibility to avoid.

[Old Greg]

It's not only the debt that gets devalued you cretins - salaries ain't going anywhere and 4 years on 5% of inflation is equivalent to additional 20% tax only the money ain't received by the Treasury: such massive fall in living standard is offset somewhat for home owners by keeping BoE rate low, however everyone else is fooked right now and once wage spiral starts (sooner or later) it will be pretty impossible to stop it.

If I run BoE a decade ago I'd increase rates high enough to prevent house bubble from occurring.

If I run BoE now I'd get rates high up at start of bubble burst to make sure it fully deflates and does not get inflated anymore.

Now a more interesting question what I'd do if I was running the Army

Deflation in a situation where public debt is high would be crippling. This is what is happening in Ireland, where the government has given up control of interest rates and money supply (printing). There is no pain-free way out, but inflation is the least painful. Think about what that does to to your sofa repayments.

[AtW]

The Bank of England are clearly not intending to repeat that mistake (that doesn't mean that they won't make new ones of course).

They made worse mistake - allowed inflation to go on uncontrolled.

Just wait until 20-30% payraises demanded by unions, and all those inflation indexed public sector pensions will need to be paid for as well.

[AtW]

Deflation in a situation where public debt is high would be crippling.

Oh that deflation thing, nobody seen it but everyone is very afraid.

Let's have massive inflation instead - it is so much better to pay £1.50 for fuel rather than £0.50.

[DimPrawn]

Oh that deflation thing, nobody seen it but everyone is very afraid.

Let's have massive inflation instead - it is so much better to pay £1.50 for fuel rather than £0.50.

As long as the indebted home owners are okay, who cares! Petrol at £5 a litre and £10 for a loaf of bread, no problem if your mortgage is tuppence a month.

Of you are paying rent however, you is fooked mate.

[Old Greg]

Oh that deflation thing, nobody seen it but everyone is very afraid.

Let's have massive inflation instead - it is so much better to pay £1.50 for fuel rather than £0.50.

Nobody has seen it because of inflationary policies. I'm sorry that you didn't have the good sense to rack up a big pile of debt ready for the inflation, but you made your choices.

[DimPrawn]

Sir Merv really should get a medal.

[AtW]

Walked past Halifax yesterday - they show 2.79% mortgage rate fixed for 2 years, but small print says you need to have 40% deposit

[Old Greg]

Walked past Halifax yesterday - they show 2.79% mortgage rate fixed for 2 years, but small print says you need to have 40% deposit

2 years is daft. It's worth paying extra for a 5 year fix.