Permabanned
Then what was the answer?
Bank of England cuts interest rate
- Thread starter Cosimo
- Start date
I really don't think that there is an answer now that we're already in this situation.
The proper solution would have been to stop the economy growing by increasing consumer debt at an unsustainable rate for the last several years.
With debt growing by 9-10% per year and GDP growing by 2-3% per year there was always going to be a time when things crashed.
Soldato
The point is that there *is* no answer, and honesty is called for. Governments in the UK and US are now desperately trying to give the impression that they can influence what's coming.
But they can only spray air freshener on the dog faeces, not wash it away. We are all going to have to eat our share of it, whether we're savers or borrowers, if we want a decade of foolish lending practices to go away. Which means resorting to the only real stealth tax... inflation.
And that's money supply type inflation, not 'oh look, that LCD TV's cheaper than last year!' type inflation. The latter, superficially sold to us as deflationary, is entirely cosmetic thanks to heavily manipulated inflation measures. The real value of our wages, and therefore our lives, is set to fall. So are house prices in real terms (a good thing) and the value of our savings (a bad thing, because real wealth comes from saving and making stuff, not flogging each other over-priced bricks & granite worktops).
Clearly at the moment governments have to supply financial insurance (ie our taxes) to the terminally constipated banking sector. But the terms & conditions should be *much* tougher than they are. Government has the banks over a barrel. And faffing around with central bank interest rates, which bear no relation to real interest rates anyway these days, is designed to appeal to the mass market audience, not those who really understand the mess we're in. Already today I've seen pundits talk about how lower credit card rates would allow people to spend more.
You can't solve problems caused by systematic over-lending by encouraging more lending. The good times are over and encouraging fiscal responsibility from top to bottom of the financial food chain is the order of the day. Jobs will be lost as the 3 million worker retail sector shrinks. That's inevitable, as is a collapse in the number of restaurants & fast food outlets. But they were never real jobs anyway. They were stolen from the future by borrowing money from the future. Now we have to live through that future, having already spent that money and used up those jobs.
But politicians can't afford to tell us that. They have to try to engineer a soft landing and talk everything up.
They will, perhaps unfortunately, fail. Meanwhile nations like France, where credit cards hardly exist at all, and mortgages have always been heavily regulated as they used to be here, laugh at us getting our come-uppance.
Ah, it makes you proud to be British, doesn't it?
Andrew McP
Not if you have a revolution and chop their heads off.. just like the French did. Although I don't think we'll have literal decapitation, there will certainly be pressure to backlash against financial freedom to banks etc.
In the last five years I've come to admire the french.. simply because they stand up for what they believe in.. but back to the UK (United Korruption).
Any politician that will stand up and say "yes I can see we're in deep, with deeper to go - but I will deliver draconian financial steps" will get my vote.. Nobody? well surprisingly I don't feel the need to vote because no politician has got balls these days.. Although that could be the reason why London is a hub of finance and will probably cease to be after this.
i wish....
like its been said above - there is no answer, no solution, no fix - its pain all the way down.
Caporegime
I too admire the French and their way of doing things. However, the French economy is suffering too - the Cac40 has seen share prices drop by a similar percentage to the FTSE100. Two of France's biggest companies, Renault and Peugeot-Citroen are horribly exposed to this slump, we've only seen this week that in the UK, new car sales were down 20-odd percent.
The inconvenient truth is that if someone loses their job, then it doesn't matter how prudent they've been with their borrowing, they will struggle to pay back their debts, which in turn causes more cash flow problems for the banks, which means they invest less, which increases unemployment. So far we haven't seen anything like massive job losses that occurred in the last recession, but we will - this is why those gleefully willing this crisis on are being incredibly naive, a lot of people who think they are in secure jobs will suddenly find that they aren't.
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Associate
- Joined
- 11 Sep 2008
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- 148
How will falling prices help the market?? They would need to fall a substaintial amount to narrow the relation between earnings and house prices.
Also what numpty would be stupid enough to buy into a falling market? At current rate a FTB buying a 100k property with a 10k deposit would not only loose there entire deposit in a year, they would also find themselves in negative equity.
Associate
- Joined
- 11 Sep 2008
- Posts
- 148
Thats not the attitude now is it.
We are meant to think, great borrow more than you can afford. Buy the X5, stack up the credit card, buy a house you can't afford. Then when it ll goes belly up the people who leant you the money can offload it to the taxpayer.
Remember no more boom and bust.
Caporegime
Sigh - how many times. They aren't trying to encourage irresponsible borrowing - those days are long gone I expect. They're trying to stop banks going bust, so all those responsible savers don't lose their deposits.
Soldato
The alternative is a decade of recession... millions out of work... crime... basically the country would break down and take decades to be repaired.
Caporegime
Yay, cheaper loan repayments !
So why not just guarantee the savings like they have done?
I really doubt it'll get that far, no matter what happens.
Caporegime
Savings are only guaranteed up to £50k.
You still lose interest while your claim is processed, which could be who knows how long.
If your current account goes bust, then you have an immediate cash flow crisis, which could have a knock-on to other businesses.
The uncertainty will actually discourage people from saving in the UK, which is not in this country's strategic interest.
Associate
- Joined
- 11 Sep 2008
- Posts
- 148
Since when has borrowing more money solved overborrowing.
Darling said the other day, borrow during the bad times and pay back during the good times. Thats a laugh Gordon borrowed crap loads during the good times to create more public spending, we built up debt not paid it back. One third of jobs created during the 'Good' times were civil servant jobs paid for on the back of borrowing.
Now the kitty is empty and we are borrowing yet more money to bail out institutions that have borrowed too much.
Don't see this as a solution personally. If they couldn't build up equity during the boom years what chance have they now?
Permabanned
It is all very well for the OcUK economists to deride the bail out plan but so far I don't think I have seen anyone come up with an alternative.
Something had to be done, whether what was done is correct I do not know and would never profess that I do know. I think it would be safe to say that that the whole situation was only going to snowball.
Something had to be done, whether what was done is correct I do not know and would never profess that I do know. I think it would be safe to say that that the whole situation was only going to snowball.
Associate
There is hope for us all................
If you had purchased £1000 of Northern Rock shares a year ago they would be
worth £4.95 now!!!!
If you had purchased £1000 of HBOS shares a week ago they would be worth
£16.50 now!!!!
If you had invested £1000 in XL Leisure they would be worth less than £5
now!!!!
If you had bought £1000 worth of Tennents Lager one year ago, drank it all,
saved all the empty aluminium cans and sent them to a recycling plant, you would
get £214!!!!
It is a relief to know that the best current investment ADVICE is to DRINK HEAVILY AND RECYCLE.
If you had purchased £1000 of Northern Rock shares a year ago they would be
worth £4.95 now!!!!
If you had purchased £1000 of HBOS shares a week ago they would be worth
£16.50 now!!!!
If you had invested £1000 in XL Leisure they would be worth less than £5
now!!!!
If you had bought £1000 worth of Tennents Lager one year ago, drank it all,
saved all the empty aluminium cans and sent them to a recycling plant, you would
get £214!!!!
It is a relief to know that the best current investment ADVICE is to DRINK HEAVILY AND RECYCLE.
I appreciate what you're saying, but the country is ****** anyway. Labour aren't decisive or smart enough to do anything about it.
So rather than take the path that discourages borrowing, they go with the one that encourages it.