Bank of England cuts interest rate

Slinwagh · 8 Oct 2008 at 13:38

Energize said:
They go bankrupt for their bad financial planning while the sensible savers are rewarded. The savings situation has got so desperate that the boe have had to guarantee upto £50k to get people to save, which has caused shares in major banks to fall even further.

I would say that deposits have been guaranteed to stop people taking their money out just as happened with Northern Rock.

Energize · 8 Oct 2008 at 13:40

Exactly. With such low interest rates people have no incentive to save with the protection as it is.

Slinwagh · 8 Oct 2008 at 13:43

Energize said:
They go bankrupt for their bad financial planning while the sensible savers are rewarded. The savings situation has got so desperate that the boe have had to guarantee upto £50k to get people to save, which has caused shares in major banks to fall even further.

Slinwagh said:
I would say that deposits have been guaranteed to stop people taking their money out just as happened with Northern Rock.

Energize said:
Exactly.

So are you saying the guarantee is in order to get people to put money in or like I have said to stop them taking it out?

You two statements seem to be a little contradictory.

brakeinup · 8 Oct 2008 at 13:43

http://www.thedailymash.co.uk/news/business/banks-to-lend-you-your-own-money-200810081308/

Energize · 8 Oct 2008 at 13:43

Slinwagh said:
So are you saying the guarantee is in order to get people to put money in or like I have said to stop them taking it out?

Both. Either way, they are trying to get as much money as possible deposited.

Third Opinion · 8 Oct 2008 at 13:44

Slinwagh said:
But lots of people are mortgaged to the hilt, have loans and large balances on credit cards, how do they save?

So we plough taxpayers money into the system, typical Labour economics.

Stagflation is back. We need to encourage responsible lending and borrowing. Not chuck good money after bad in an attempt to move consumer spending and house prices, again built on the back of crippling personal debt.

Slinwagh · 8 Oct 2008 at 13:45

Energize said:
Both, either way it doesn't matter.

Well it does because right now the biggest threat of those two is people taking all their money out and dumping into banks that are willing to guarantee 100% of savers deposits.

Slinwagh · 8 Oct 2008 at 13:46

Third Opinion said:
So we plough taxpayers money into the system, typical Labour economics.

Stagflation is back. We need to encourage responsible lending and borrowing. Not chuck good money after bad in an attempt to move consumer spending and house prices, again built on the back of crippling personal debt.

It is all very well to say that but would do you propose as an alternative?

teaboy5 · 8 Oct 2008 at 13:46

Energize said:
*Watches inflation rocket past 5%*

Welcome to new Zimbabwe.

He loses to inflation.

The new zimbabwe? :rolleyes:

Please stop making silly comments like that and take this towel and wipe your month with it please.

Energize · 8 Oct 2008 at 13:47

teaboy5 said:
The new zimbabwe?

It was tongue in cheek. :rolleyes:

Third Opinion · 8 Oct 2008 at 13:51

Slinwagh said:
It is all very well to say that but would do you propose as an alternative?

What would you propose, you think this is a permenant solution? Plough money in, lend out again willy nilly to people who can't really afford it. Then in a few years tme face the same problem except it will be many times worse.

The markets need to correct themselves. Basic housing for example is well beyond the means of average salaries without taking on risky loans.

LordSplodge · 8 Oct 2008 at 13:53

mangobreeder said:
this will come down now the govt are covering Interbank lending.

I doubt it will come down very quickly. The banking sector is still up the creak and the paddle the Government has issued isn't very good.

Until banks are certain they can lend to a bank and it won't go bust then LIBOR will still be well above the BOE rate.

blaze of glory · 8 Oct 2008 at 13:55

Third Opinion said:
What would you propose, you think this is a permenant solution? Plough money in, lend out again willy nilly to people who can't really afford it. Then in a few years tme face the same problem except it will be many times worse.

The markets need to correct themselves. Basic housing for example is well beyond the means of average salaries without taking on risky loans.

Totally agree, the debt bubble has been a ticking timebomb for quite a few years now.

The problem with this Government is it perceives debt as wealth.

Slinwagh · 8 Oct 2008 at 14:02

Third Opinion said:
What would you propose, you think this is a permenant solution? Plough money in, lend out again willy nilly to people who can't really afford it. Then in a few years tme face the same problem except it will be many times worse.

The markets need to correct themselves. Basic housing for example is well beyond the means of average salaries without taking on risky loans.

Yes financial institutions needs to sort themselves out but that will not happen over night.

As for lending I think it is acknowledged now that the banks are nowhere near as ready to lend to the consumer, business or each other, this needs to be carried forward to enable future responsible lending.

blaze of glory · 8 Oct 2008 at 14:05

Slinwagh said:
Yes financial institutions needs to sort themselves out but that will not happen over night.

As for lending I think it is acknowledged now that the banks are nowhere near as ready to lend to the consumer, business or each other, this needs to be carried forward to enable future responsible lending.

Yes thats what I am saying, however without irresponsible lending how on earth do you kick start the housing market (in Gordons speech) using the responsible 3.5x salary when the averge homes in the South East are around 10x the average salary?

I agree with Third Opinion, I re-mortgaged two months ago needing just 2.5x salary. I had no trouble getting a good deal, however a first time buyer would need a huge, risky loan. Without FTBs the market is halting as there isn't anyone willing to take these high risks.

Admiral Huddy · 8 Oct 2008 at 14:10

Third Opinion said:
So the Government target of 2% inflation no longer matters then?

We are running at close to 5, and expected to go beyond this.

I'm not sure that will happen. With the termoil over the last month and the prospect of job losses, people will be pulling their belts in a bit. This is why short term the cut makes no difference.

Slinwagh · 8 Oct 2008 at 14:12

blaze of glory said:
Yes thats what I am saying, however without irresponsible lending how on earth do you kick start the housing market (in Gordons speech) using the responsible 3.5x salary when the averge homes in the South East are around 10x the average salary?

House prices are falling, stamp duty has been relaxed, interest rates have been lowered. All of this will help the housing market.

Andrew_McP · 8 Oct 2008 at 14:23

Anyone who thinks this coordinated cut is good news is completely misunderstanding the situation we're in. The US and UK economies have already tripped and are falling towards the world's biggest pile of financial dog faeces. All the actions announced today will only deflect our trajectory slightly, not stop us getting a a faceful of pre-digested Pedigree Chum.

Fasten your seatbelts and put a peg on your nose everyone. This ride had only just begun.

Andrew McP

Admiral Huddy · 8 Oct 2008 at 14:24

Slinwagh said:
House prices are falling, stamp duty has been relaxed, interest rates have been lowered. All of this will help the housing market.

With the banks not lending I don't think these half hearted measure will help and the stamp duty is a joke. In order for the market to move again, then everyone needs benefit because of the buying chain. It's no good just giving the benefit to the lower end of the market if the middle and top isn’t moving.

The only thing that puts me off moving is giving the treasury 15K in stamp duty. If the middle market goes no where, then no one can. As I said earlier, I think the reinstatement of MIRAS and the abolishment of stamp duty for every one, regardless of house value will have an immediate impact.

aardvark · 8 Oct 2008 at 14:36

Andrew_McP said:
Anyone who thinks this coordinated cut is good news is completely misunderstanding the situation we're in. The US and UK economies have already tripped and are falling towards the world's biggest pile of financial dog faeces. All the actions announced today will only deflect our trajectory slightly, not stop us getting a a faceful of pre-digested Pedigree Chum.

Fasten your seatbelts and put a peg on your nose everyone. This ride had only just begun.

Andrew McP

+1

exactly - all this means is that we are screwed further in the future and not today - and that its the people that will be screwed to save rich people (not that its surprising as thats what has always happened throughout history)