Reply to: Oh dear: UK more at risk than other major economies of losing top credit rating

[EternalOptimist]

Exactly - they settled eventually, but before that they were invading shores from time to time. They also settled in what later became Russia/Ukraine.

AtW , you old Viking you. Have you got a hat with horns on it ?

AtW Bluetooth - has a certain ring about it

[AtW]

No, no, no. I was enjoying this thread until your knowledge of Vikings went astray. Vikings settled widely, including Britain (the Danelaw) and France, Normandy (check the origin of that word).

Exactly - they settled eventually, but before that they were invading shores from time to time. They also settled in what later became Russia/Ukraine.

[TinTrump]

I was tempted to add some info about Russia but couldn't recall if it was Vikings or the Rus (Swedish version) who mainly did that. Dredging up stuff I did 20+ years ago.

[EternalOptimist]

No, no, no. I was enjoying this thread until your knowledge of Vikings went astray. Vikings settled widely, including Britain (the Danelaw) and France, Normandy (check the origin of that word).

HTH

Sorry to keep the off topic going, but not only is Tin Trum right, he is righter than he knows.
The Vikings actually went through the river systems in Russia and ended up establishing themselves in Byzantium, where they were known as the Varangian guard.

[TinTrump]

Catholic spain would have pillaged coastal cities, but then pulled back - vikings have been doing it for centuries, one more invasion would only make locals stronger.

No, no, no. I was enjoying this thread until your knowledge of Vikings went astray. Vikings settled widely, including Britain (the Danelaw) and France, Normandy (check the origin of that word).

HTH

[AtW]

So it has an impact then. I'm sure if BoE rates went up to 10% people would be squawking pretty quickly.

They have impact, but not the one they want - you can jack up taxes and things will go real bad, but if you drop them without other factors, then it won't work.

The fact that interest rates can't control every aspect of the economy doesn't mean that BoE rates have zero impact.

They no longer have any impact - events took control out of their hands and as soon as they got rates to near zero they lost it, even printing money does not affect things that much.

[centurian]

It probably will, the main question is the delta between BoE rate and LIBOR, it is much larger now (in relative terms), than I think it ever was in recent times: so much that BoE rate no longer matters in terms of dropping it, increasing it will probably result in other rates going up.

So it has an impact then. I'm sure if BoE rates went up to 10% people would be squawking pretty quickly.

It's just that lowering them past a certain point has a decreasing overall effect.

The fact that interest rates can't control every aspect of the economy doesn't mean that BoE rates have zero impact.

[AtW]

Totally? Doesn't the BoE rate influence other lending interests rates upwards? For example if BoE rate rose to 2%, wouldn't that push LIBOR rates up?

It probably will, the main question is the delta between BoE rate and LIBOR, it is much larger now (in relative terms), than I think it ever was in recent times: so much that BoE rate no longer matters in terms of dropping it, increasing it will probably result in other rates going up.

[TimberWolf]

BoE rate: 0.50%
LIBOR rate: 4.05% (http://www.swap-rates.com/)



BoE rates totally meaningless... well, that's the rate UK Govt probably borrows from BoE

Totally? Doesn't the BoE rate still influence other lending interests rates, upwards? For example if BoE rate rose to 2%, wouldn't that push LIBOR rates up?

[AtW]

There was an interesting piece on the BBC website last year about interest rate setting:

http://news.bbc.co.uk/2/hi/business/7680552.stm

Over here, people have taken umbrage over the fact that the local banks (mostly Australian owned) haven't been reducing interest rates as far as the Reserve Bank. As I said in the previous post, it is because vast sums of credit are sourced overseas but some locals see it as an argument for the government to take more control over local bank behaviour.

BoE rate: 0.50%
LIBOR rate: 4.05% (http://www.swap-rates.com/)



BoE rates totally meaningless... well, that's the rate UK Govt probably borrows from BoE

[Gonzo]

In short, cut now, or cut a lot more later... whether you like it or not...

Or invade Norway .......

[centurian]

If the debt servicing is more expensive than that corrective action becomes more difficult.

In short, cut now, or cut a lot more later... whether you like it or not...

[centurian]

That's utter bollox.

What recent events have proven is that BoE rates mean jack to UK - they dropped them down to nearly 0, but what are the morgage rates? Credit card rates?

They had to print money to actually have any effect on economy and this isn't working particularly well, apart from sterling devaluation but that's not even rates dependent anymore.

Because the economy is so fooked (and was before the credit crunch even started) that nothing the BoE can do will completely solve it alone. But then neither can any other organisation, so I maintain that the BoE has the biggest impact of the existing players.

Back to my Sun/Moon analogy, the Moon has the biggest influence over water flows, but the Moon can't lift water out of the seas, nor can any other astronomical body (through gravity anyway).

[Gonzo]

That's utter bollox.

What recent events have proven is that BoE rates mean jack to UK - they dropped them down to nearly 0, but what are the morgage rates? Credit card rates?

They had to print money to actually have any effect on economy and this isn't working particularly well, apart from sterling devaluation but that's not even rates dependent anymore.

There was an interesting piece on the BBC website last year about interest rate setting:

http://news.bbc.co.uk/2/hi/business/7680552.stm

Over here, people have taken umbrage over the fact that the local banks (mostly Australian owned) haven't been reducing interest rates as far as the Reserve Bank. As I said in the previous post, it is because vast sums of credit are sourced overseas but some locals see it as an argument for the government to take more control over local bank behaviour.

[pzz76077]

As centurian explained, the UK government is spending more cash than it receives by an unprecedented margin and it has to borrow to fund that difference.

If the county's credit rating is downgraded then the cost of servicing that debt will be more expensive.

The overspending cannot go on forever and will have to be corrected by reducing spending or increasing income in the future, otherwise the country will go bust.

If the debt servicing is more expensive than that corrective action becomes more difficult.

The obvious answers to the corrective action are higher taxes and / or government spending cuts, both will have to be more acute if the government is spending more to service its debts. That is how the person in the street will be affected.

There are other options - print money or invade a mineral rich country come to mind but neither of these are without pretty drastic consequences.


I don't know what the knock-on effect to the debts of the general public could be but that is another possible consequence.

Over here, earlier in the year the Finance Minister went on a massive charm offensive to stop the rating agencies donwgrading the country's credit rating. Being a tiny economy, the house price boom of the past few years has been funded by credit from overseas. If overseas decided to stop lending that would result in property-market armageddon.

I doubt that retail lending in the UK is so dependent on overseas finance to have the same knock-on effect for the consumer though, but I don't know the figures.

Shirley MP's can just put all this on their expenses?? Job done.

PZZ