Fuel up/down again

[TW]Fox;19466364 said:
In 2008, $100 oil was 100p a litre fuel. But that was before the Bank of England destroyed the value of our currency with artificially low interest rates they continue to refuse to raise.
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I think I've seen you mention this before? :p
 
[TW]Fox;19466364 said:
But that was before the Bank of England destroyed the value of our currency with artificially low interest rates they continue to refuse to raise.
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Can you explain this to someone who say, doesn't have an understanding of finance beyond knowing what an interest rate does when it comes to their own savings when advertised by a bank.
 
hurfdurf said:
Can you explain this to someone who say, doesn't have an understanding of finance beyond knowing what an interest rate does when it comes to their own savings when advertised by a bank.
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The higher our interest rates, the higher the returns available to investors. This increases an economies attractiveness to foreign investors, which increases the demand for that countries currency, which boosts its value. Low interest rates have the opposite effect.

This is why sterling does nicely every time the market convinces itself a rate rise is due, and then snaps back again when the BOE decide to, yet again, do absolutely nothing :p
 
[TW]Fox;19466564 said:
The higher our interest rates, the higher the returns available to investors. This increases an economies attractiveness to foreign investors, which increases the demand for that countries currency, which boosts its value. Low interest rates have the opposite effect.

This is why sterling does nicely every time the market convinces itself a rate rise is due, and then snaps back again when the BOE decide to, yet again, do absolutely nothing :p
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This fiscal strategy can also be employed by our government to increase exports......hang on we have nothing to export:p
 
You seem to forget that while raising the interest rate might have an effect on the price of fuel, it will bring misery to many many people with increased mortgage and/or loan payments which will often be in excess of any money they would save with cheaper fuel. Swings and roundabouts.
 
[TW]Fox;19466589 said:
Yea, it seems we've decided to go for a boost exports strategy whilst forgetting we are a net importer of pretty much everything, doh :p
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[TW]Fox;19466564 said:
The higher our interest rates, the higher the returns available to investors. This increases an economies attractiveness to foreign investors, which increases the demand for that countries currency, which boosts its value. Low interest rates have the opposite effect.

This is why sterling does nicely every time the market convinces itself a rate rise is due, and then snaps back again when the BOE decide to, yet again, do absolutely nothing :p
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It really is not that simple. Otherwise we'd just set interest rates to 20% and watch the money roll in.

Higher interest rates encourage foreign investment due to the higher return, but they make expansion for domestic businesses difficult as it is more expensive to borrow. Foreign investors, strangely enough, also want some security that we might be able to pay them back one day.

The equation sort of stacks up based on the old model (fractional reserve banking, which is still allowed and encouraged) where banks are permitted to create money from tiny (10%) reserves - almost out of nothing.

When you have a model like this, you absolutely need foreign investment to come in to prop up the system. You do that by selling stuff to them that we make - exports.

Of course, we could just keep borrowing and spending our cash on buying stuff from abroad, but thankfully despite what one might think of the current government, Brown will never again make a decision which affects our nation.

Now - back to fuel prices...
 
MissChief said:
You seem to forget that while raising the interest rate might have an effect on the price of fuel, it will bring misery to many many people with increased mortgage and/or loan payments which will often be in excess of any money they would save with cheaper fuel. Swings and roundabouts.
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I don't seem to forget that at all - that's a now rather unfortunate situation we find ourselves in as a direct result of the decision to lower interest rates to an unsustainable and artificial low. Then once this had happened, people thought 'oooh, I can afford to buy a house now' with zero consideration about what would happen to the affordabilty when, not if, rates returned to a normal level.

Now we are stuck with fake low interest rates and a bunch of people who would be on the breadline if they increased.
 
No point in me multi-quoting it all, but Fox is right :).


Just had a look at the BOE base rate history (yes, I know that's not actually what you get a mortgage at etc etc)... The year my parents got married the base rate was 15%. Now as a young whippersnapper who's never had it so good etc that to me looks massive and I'm thinking "WTF why can't I have that on my savings account" ... yet whatever 'misery' etc it caused can't have been that bad as despite their finances being none of my business I know that they successfully paid it off a few years back.
 
[TW]Fox;19467834 said:
I don't seem to forget that at all - that's a now rather unfortunate situation we find ourselves in as a direct result of the decision to lower interest rates to an unsustainable and artificial low. Then once this had happened, people thought 'oooh, I can afford to buy a house now' with zero consideration about what would happen to the affordabilty when, not if, rates returned to a normal level.

Now we are stuck with fake low interest rates and a bunch of people who would be on the breadline if they increased.
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but there are also many people who did get mortgages several years ago when interest rates were also in double figures who, along with everyone else, thanks to rising costs for just about everything including fuel when earnings aren't increasing exponentially, would still be stuck in a perilous position.

Don't get me wrong, I think interest rates do need to rise as such low rates aren't actually helping, but it's not just those who bought recently that would be affected.
 
And today oil soars back through $110 almost completely erasing the drop last week. Watch it go even higher when the Greek Parliament votes to approve the austerity measures any minute now.

That said these recent fuel price drops were really as a result of the fall in prices last month, not the most recent fall.
 
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