Jan 04

Reading lots of what some would call wonkish stuff. Most intriguing thing is that realistically QE has little no effect and interest rates far from determining much follow growth. The latter point being that pushing them up to be seen to do something or because of zombie businesses and lack of income for savers or having the over stretched need to be made to suffer for accepting Govt advice and easy credit (excuse depending on whether you’re a Conservative or Liberal supporting the same policy). Unlike in say 2009 when Brown/Darling/Balls were sorting out their mates if interest rates floated or if it was even possible for them to float in a market anymore they would be near zero anyway now is my belief.

I don’t see that pushing rates up works now as if you do it you may precipitate a collapse. As obtuse as I am I cannot say I would bring down the house of cards so dramatically especially when it may fall by itself under the sheer weight of debt and falling incomes. However whilst economists and their GDP measure look fine the economy is clearly not working or intended to work for the vast majority.

The issue with economists who shout down the raise interest rate brigade is they are de facto supporting the status quo. Really if it is to be seen as other than an esoteric tool of the Kleptocratic class I think economists need to make more noise. Otherwise the profession is merely the loud whores of the City and Wall Street – whatever classically liberal social views they claim to hold with their Nobel Prizes – plenty of God bothering Kleptocrats ignore the line about Camels and Eye of the Needle too.

Anyway best fit to current situation Plutocracy or Kleptocracy?

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Mar 07

Vince Cable called for an end to Austerity.

Sadly he did not call for an end to QE and artificial interest rates as the gutless clown Osborne prepares to hand over the economy to the QE junkie Carney. Osborne is showing even greater cowardice than Brown who one could argue had good reason to hand over monetary policy in 1997 even if that abdication of responsibility looks like criminal incompetence 15 years later.

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Nov 10

Low interest rates a no brainer good for everyone. Why would anyone want a market rate of interest?

Here are the positive effects.

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Aug 14

You don’t need to be a Marxist or a genius or to have studied economics, indeed that may be a best not to have, to know that the growth of the Banks and the wealth of people who don’t pay taxes and stack it up abroad is a drain on the economy.

Put simply how can banks make money when they barely lend and interest rates are below 1%? When economic activity is down in every other sector they are there to allocate capital to?  Continue reading »

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May 25

For years many of us welcomed low interest rates. Our mortgages got cheaper after all. Continue reading »

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Jan 21

The real price of money is high at present. Credit for you or I without tracker mortgages is not much cheaper than before the Bank of England reduced interest rates to a ludicrous 0.5% even after quantitative easing. Not just for individuals it seems as the Skipton Building Society raised rates for it’s mortgage holders today well above the base rate. Why because they cannot get the cheap money that the bigger mostly Govt owned rivals can. From the Telegraph:-

Skipton Building Society has decided to trigger its “exceptional circumstances” clause and raise the rate the society charges its mortgage holders from 3.5pc to 4.95pc

Has all this easing and cheap credit worked? Hard to tell the end of the world-ists would say they staved off a longer and deeper recession. Some might say it’s like spending cuts tomorrow turning a short term crisis into a long term one. What it seems to have done is cemented the structural problems of the UK economy by seeking to tilt the economy to keep those parts afloat that brought it down. There has been no reform of the financial sector just billions so they can enjoy millions in bonuses.

It has effectively killed savers. People earning a market rate 5 or 6 percent well above inflation are now lucky to get 3% which is inflation. Whereas the banks and bankers have had no trouble making massive money and bonuses because they can abuse their savers or buy cheap money from the authorities and sell it at a much higher rate – spongers just handed money.

Quite whether base rates on which most saver’s rates are based have to be quite so low is beyond me, 3% maybe but 0.5% is ridiculous for an economy already consuming far more than it produces – why we have inflation and a shrinking economy with over priced assets – genius in a bad way. To me it seems like a cynical way of boosting the banking sector at the expense of everyone else in the economy which has not worked very well so far this decade.

The policies of the UK Govt appear to have been to keep the same economy, rules and asset bubble partially inflated until an election? I would not mind but we have had zero reform of the banking sector albeit now the US Govt has led maybe the lick-spittle Brown Govt will follow.

My question is more fundamental to the Bank of England Monetary Policy Committee (MPC group) and the Govt of the UK. Does anyone really believe in the market any more? If so why aren’t interest rates much much higher? Why are we handing money to people who have cost the country so much money? Taking money from savers to over consumers?

I see no conspiracy just reactive politicians conned because they had no agenda or thought and got sucked into fire-fighting. The new Bankers favourite phrases are

If you owe a Billion you’re in trouble If you owe a hundred Billion then your Govt is in trouble and you’re just fine.

Best way to a small forture lose a large one for your bank and then let the Govt hand you free money.

The next time some bigot complains about the cost of immigrants tell them Bankers have and will cost more and don’t clean hospitals either.

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Jan 15

The reason banks are making huge profits so quickly again is that interest rates are set low so they, thanks to the UK and US Govt, can screw savers, annuity buyers and make money as it’s almost impossible to lose money when it’s cheaper to buy than sell.

Obama’s response is planning a tax to return a speciously large looking but actually trivial $55Bn over 10 years. It’s really a reflection of his failure to secure reform in return for the bail outs last year – almost a petulant response to being out negotiated. It’s more ambitious than Darling’s bonus tax in the UK where despite owning several banks he failed to get an ounce of reform either.

Arguably the UK Govt might benefit from its shares but these are primarily in the retail sector – it’s why large parts of the UK  crash was not caused per se by the Sub-Prime issues but more by the business plans of our retail banks. Worldwide the biggest problems were in the investment bank sector and these are the people literally able to buy discounted money now and laugh at the idiots (the general public) who are handing them vast sums of money.

If the UK/US Govts do not reform here is a question I’d like answered can we really continue to run our economies leeching on transactions involving other countries’ money and how long can that continue?

It’s also built on the mistaken assumption that the City has shown a net profit in years. The cost of last year’s crash has not fallen on the banks but on the people. Any contribution they made since the start of the decade has been more than wiped out (BTW 2001 – decade still has a year to run).  The fact is that real wealth is not the size of GDP and domestic asset prices but the living standards of the vast majority of the people.

The banks are benefiting from the state setting interest rates below market rates. Money is in short supply and its price should rise not fall.

Does anyone genuinely believe in the market any more?

No, least of all those bankers who most proclaim it.

BTW Obviously it’s not on individuals but it’s easier to say Obama than the President’s Staff and Retinue or Darling rather than The British Treasury. The person with the most individual responsibility!

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