UK Economy

[superfrank]

Negative interest rates idea floated by Bank's Paul Tucker
http://www.bbc.co.uk/news/business-21589128

so we're now probably going to get negative interest rates for bank deposits at the BoE as they try to force the banks to lend more.

the banks are getting near free (printed) money from the BoE via the Funding for Lending Scheme (FLS) but surely banks only lend in a way that makes commercial sense for them, i.e. they assess credit risk, so why does the BoE think it knows better?

it's yet another attempt to prevent the necessary deleveraging and try to pump the credit bubble back up. it's clear from all this madness that central banks think that the only way to achieve growth is via even more credit and increasing the money supply by artificial means (even though there is precious little demand for new credit in the real economy).

i'm sure that if they print enough then they'll achieve some nominal growth and get house prices rising again, but the £ will be toast and in real terms we'll all be worse off as inflation rises faster than growth/wages. anyone who thinks the UK is going to prosper in the coming years needs to wake up (the bankers and a few rich people will do very well, but at the expense of everyone else and our children's futures).

edit: if the BoE really wanted to increase demand in the economy then they should give the printed money to poorer people and people on benefits - the reason being that these people generally spend all the money they receive and don't save it. but the funny money always gets given to bankers and everyone else is has to borrow it from them. QE benefits only a certain class of people and central banks like it that way.

[CaerMyrddin]

Quick question, how do you protect yourself against inflation?

[superfrank]

Quick question, how do you protect yourself against inflation?

get a job as a banker!

seriously though, if you're trying protect savings then you need yields equal to inflation (after tax). it's now nearly impossible to get risk-free yields anywhere near inflation because of the actions of central banks (who want you to either spend you capital, or put it into the stock market).

tough one. longer term and personally i'd want exposure to commodities because western currencies are being devalued, and i expect another commodity price boom (especially in $ terms) at some point after they've finished pumping stocks.

or follow the crowd and buy some shares in high-dividend quality companies after a dip in the market - then close your eyes and hope for the best! mining firms could be a good bet because you get exposure to the price of commodities and a dividend to boot, but look for ones that operate in stable countries and that are well capitalised (small mining firms are notorious for eating up their capital then coming back to the market for more).

i'm no investor so please take my ramblings with a large pinch of salt.

[CaerMyrddin]

Thanks a lot Frank.

It amazes me how you get such low yelds right now whyle banks are charging so hight interests on loans to small companies...

Any other views?

What about distribution? They can incorporate inflation pretty quickly?

[superfrank]

i don't know mate, like i say i'm no investor so i don't feel qualified to give any advice. maybe others on here with investments can comment.

It amazes me how you get such low yelds right now whyle banks are charging so hight interests on loans to small companies...

the reason is that the banks don't need savers money anymore because the central banks print it for them and they get to borrow it at 0.25% (even less than they give to savers!).

[CaerMyrddin]

It just has to stop doesn't it?

Yesterday went to a bank to set up a new account, they are paying 4% on a 12M deposit to new costumers. They had an outdoor with the superb offer of a 7.5% to small companies (but only under certain conditions)

[superfrank]

i doubt it will stop. you have to remember that all this market distortion by central banks has created a zombie-like situation where assets are overvalued but have been kept from crashing to fair value by zero interest rate policies and QE. that means there are limited lending opportunities for banks (who already have loans books that are not in great shape and only kept afloat by said policies).

the banks don't see much growth coming, and with no property bubble to pump they are happy to take the cheap money and bailouts and keep the bonus pot full while they slowly recapitalise.

[superfrank]

Budget 2013: Radical options for the UK economy
http://www.bbc.co.uk/news/business-20617088

- Negative interest rates
- Promising to stoke inflation
- Helicopter money
- Old-school public works schemes
- A debt jubilee

or how about a real radical approach... stop trying to solve debt problems with more debt and accept the country has to live within its means at a reduced standard of living that is sustainable?

[switesh]

Australia has been on a run of steady cuts by RBA, currently standing at 2.5% it is the lowest it's ever been with more cuts likely to come.

[andyfuller]

Just been said in the Bank Of England's forward guidance that interest rates won't rise until Unemployment falls below 7%. They are ready to buy more gilts if needed, will not reverse QE

[superfrank]

Ed Balls pledges to 'balance the books' by 2020
http://www.bbc.co.uk/news/uk-politics-25885606

is it April fools' day already?!

as someone says in the article comments, "Balls is not fit to run the finances of a fairground burger van".

[kelpie]

Ed Balls pledges to 'balance the books' by 2020
http://www.bbc.co.uk/news/uk-politics-25885606

is it April fools' day already?!

as someone says in the article comments, "Balls is not fit to run the finances of a fairground burger van".

Bollocks isn't it. 2020 just happens to be two elections out.

Ed, you muppet, there's the small matter of paying for a couple of million of your useless immigrants in ghettos across England. Unless you're a magician...

[Iron]

I wouldn't describe the immigrants as useless. Many are bloody hard working.

BTW, I question the official government figures for immigration - I think they are an underestimate. Where I live, you see immigrants absolutely everywhere! The block of flats I live in even has a sign in Polish as well as English asking people to close the front door securely!

Jeff

there's the small matter of paying for a couple of million of your useless immigrants in ghettos across England.

[kelpie]

I wouldn't describe the immigrants as useless. Many are bloody hard working.

BTW, I question the official government figures for immigration - I think they are an underestimate.

Jeff

With you on the stats. Right now, we're nearly running blind on immigration stats

But facts are facts, many MANY immigrants that Ed and his mates let in (sorry, encouraged to come) are utterly flipping useless. They're just benefit thieves, pure and simple. That some immigrants are economically advantageous is a different point. The scale of the problem caused by the thieves is in the millions of people and billions of pounds per year

Ed and the whole Labour fuck up of the naughties are economically wreckless. Rather than saying we need tax paying contract workers, they said we need Labour voters... and worked backwards from that.

[superfrank]

Help to Buy 'mistaken' and 'dysfunctional' says Posen
http://www.bbc.co.uk/news/business-26679739

The idea of pumping up credit for middle to upper-middle class people to spend more on housing, when people have already spent too much on housing, is dysfunctional

funny how they only ever say anything when they've left... 'too busy keeping their cushy jobs and perks when they've got any power.

govt underwriting private loans is about as anti-free market as you can get... all about politics (votes) imho - the easiest way to get short-term growth is to pump asset prices via loose credit - remind me how that ended last time!!!