Reply to: About time interest rates were slashed

[BrilloPad]

If they want to keep inflation down, why don't they just print less money?

Because people would just pay by credit card?

[Cyberman]

It makes no difference if the banks won't lend to each other. The last time interest rates went down the LIBOR went up!

Having rates too low for too long has made this mess!
Thank god you aren't the chancellor, it would be an even worse mess

It was not the low interest rates that were the problem. It was the failure to adhere to credit controls. Lending should always be based on bank deposits and of course on ABILITY TO REPAY. The effective removal of this link by Brown and any sort of commonsense regulation to 'remove bust for ever' was the true failure!!

[TimberWolf]

If they want to keep inflation down, why don't they just print less money?

Money isn't real anyway, it's just numbers. As long as we have our energy needs in place we will be fine, no mater how much chancellors and bankers screw around. Fortunately we are not dependent on importing energy or dependent on foreign powers for our supply

We really should get away from the concept of money being something real though and get the real things in place rather than doing the opposite.

[BrilloPad]

It makes no difference if the banks won't lend to each other. The last time interest rates went down the LIBOR went up!

Having rates too low for too long has made this mess!
Thank god you aren't the chancellor, it would be an even worse mess

Why are you trolling? quite unlike you - are you trying to remind us of atw? or maybe you think that any serious economic debate should be interrupted by some nonsense (see post #10 on this thread).

Libor=base rate + swap rate. swap rate went up by more than base rate went down.

But maybe you have hit on a good point - maybe swap rate is high as no-one trusts Darling or Brown. However I think if Cyberman was in charge then trust would be restored and economic recovery would commence.

[Bagpuss]

Interest rates should have been slashed almost a year ago. Jobs and people's homes should come before inflation, but Brown in his wisdom put the country in a straightjacket with the MPC only having to care about infation. Yet another failure of New lie policy!!

It makes no difference if the banks won't lend to each other. The last time interest rates went down the LIBOR went up!

Having rates too low for too long has made this mess!
Thank god you aren't the chancellor, it would be an even worse mess

[Cyberman]

That's a very un-Tory like attitude, Thatchers Government kept interest rates high for years to combat inflation, those high rates did no favours at all to business and forced tens of thousands of reposessions. In Thatcher and Majors Governments the interest rates were set by the Chancellor too rather than the Bank of England so the blame lay entirely with the politicians.

Recent base rate drops have not been mirrored by mortgage lenders and some even put their rates up 2 days ago because of the interbank money costs going up.

... but today we have a very serious situation and Brown is very complacent . In Thatcher's day at least she believed in balancing the books. Brown has let rip with spending and borrowing, and with the credit crunch also having a devastating impact there is a major risk of a depression. In times like this normally taxes would be reduced, but Brown has failed us all by having not having that contingency available. Thus, interest rates are our only major tool now available, and yet again we are dithering towards disaster. We needed a 1 percent cut a year ago.

[HairyArsedBloke]

It should have happened to LTCM in 1998 - by slasing interest rates then and in 2002 the "Greenspan put" got us to the current situation. I don't mind one going under - it is if it is more than one we should worry.

Yes.

[BrilloPad]

I'm Spartacus
No next.
Yes Next.

Sorry but I could not let an economic thread have a whole page without some total nonsens. Its just not cuk form!

[BrilloPad]

Very true; as much of the inflation is coming from imported commodities then the exchange rate is the key here. Cutting interest rates will not help. However, commodity prices have fallen a lot from their peak earlier in the year.

If you hold an asset, like a house, of course you don’t want to see the price go down. However, most people believe that they were over valued. They idea that it could be overcome by stagnant growth in house prices and let general inflation discount the excess away is nonsense.

Each day I find myself moving more towards the “Let ‘em crash” school with regard to the financial institutions. They problem is that they will not lend to each other because of the fears of failure of the counterparty. We have seen negative rates on US government paper, but simultaneously record highs on LIBOR. A bank would rather pay the government to take their money overnight rather than lend it to another bank because they had no confidence that the counterparty would be there in the morning.

To get that fear out the market cannot be done by these idiotic plans of the taxpayers in the US and UK buying the toxic debt from the banks. Banks have failed in the past and I am sure that they will fail in the future. This is one of those times that the market needs to give people a good spanking to teach them a lesson in how to behave and play nice. Get it over with, have a cry, and then we can get back to some sort of order. This has to apply to idiotic bank lenders and equally idiotic borrowers.

It should have happened to LTCM in 1998 - by slasing interest rates then and in 2002 the "Greenspan put" got us to the current situation. I don't mind one going under - it is if it is more than one we should worry.

[BrilloPad]

That's a very un-Tory like attitude, Thatchers Government kept interest rates high for years to combat inflation, those high rates did no favours at all to business and forced tens of thousands of reposessions. In Thatcher and Majors Governments the interest rates were set by the Chancellor too rather than the Bank of England so the blame lay entirely with the politicians.

Recent base rate drops have not been mirrored by mortgage lenders and some even put their rates up 2 days ago because of the interbank money costs going up.

That is very true. But there is now a very real risk of deflation in 2 years time? If that happens times will get very tough indeed.....

[HairyArsedBloke]

Foreign investors want to lend into the UK economy to get the better interest rates, and buy sterling, increasing the value of sterling, and as most of our goods are imported, lowering our cost to buy - which lowers inflation in the UK.

Very true; as much of the inflation is coming from imported commodities then the exchange rate is the key here. Cutting interest rates will not help. However, commodity prices have fallen a lot from their peak earlier in the year.

If you hold an asset, like a house, of course you don’t want to see the price go down. However, most people believe that they were over valued. They idea that it could be overcome by stagnant growth in house prices and let general inflation discount the excess away is nonsense.

Each day I find myself moving more towards the “Let ‘em crash” school with regard to the financial institutions. They problem is that they will not lend to each other because of the fears of failure of the counterparty. We have seen negative rates on US government paper, but simultaneously record highs on LIBOR. A bank would rather pay the government to take their money overnight rather than lend it to another bank because they had no confidence that the counterparty would be there in the morning.

To get that fear out the market cannot be done by these idiotic plans of the taxpayers in the US and UK buying the toxic debt from the banks. Banks have failed in the past and I am sure that they will fail in the future. This is one of those times that the market needs to give people a good spanking to teach them a lesson in how to behave and play nice. Get it over with, have a cry, and then we can get back to some sort of order. This has to apply to idiotic bank lenders and equally idiotic borrowers.

[FarmerPalmer]

If inflation has been largely due to external factors then I can't quite see how it is reduced by higher interest rates anyway.

Foreign investors want to lend into the UK economy to get the better interest rates, and buy sterling, increasing the value of sterling, and as most of our goods are imported, lowering our cost to buy - which lowers inflation in the UK.

[xoggoth]

If inflation has been largely due to external factors then I can't quite see how it is reduced by higher interest rates anyway. The fear of joblessness in current conditions should curb wage restraint, assuming the goverment has the guts to face up to the public sector of course where market forces do not apply.

PS Agree with previous, in these conditions rates to savers and lenders are going to be severely modified from base rate and would a reduction just be used to get increased profit?

[TykeMerc]

Interest rates should have been slashed almost a year ago. Jobs and people's homes should come before inflation, but Brown in his wisdom put the country in a straightjacket with the MPC only having to care about infation. Yet another failure of New lie policy!!

That's a very un-Tory like attitude, Thatchers Government kept interest rates high for years to combat inflation, those high rates did no favours at all to business and forced tens of thousands of reposessions. In Thatcher and Majors Governments the interest rates were set by the Chancellor too rather than the Bank of England so the blame lay entirely with the politicians.

Recent base rate drops have not been mirrored by mortgage lenders and some even put their rates up 2 days ago because of the interbank money costs going up.

[Cyberman]

Interest rates should have been slashed almost a year ago. Jobs and people's homes should come before inflation, but Brown in his wisdom put the country in a straightjacket with the MPC only having to care about infation. Yet another failure of New lie policy!!