..the problem I see with noonan announcing a 4.7% GDP growth rate which is fine, is inflation with low rates combined, speculation enters the market, market overheats, then they have to apply the brakes , raise interest rates.. Low rates are fine when you have a growth rate of 1%, but when growth exceeds the interest rate you have inflation..
anytime the FED has indicated that interest rate rises might be a reality sooner rather than later , stocks have sold off
when bernanke was there , lowering rates was seen as a way of juicing the equity market some more , I,E , corporations could borrow for much less as could large investment banks who bought stock in these corporations
im definatley missing something , maybe im too dumb
this is what I am getting at , you are codding yourself if you believe the banks or going to keep these policy going to save your business/ or home, they are doing it so they can tighten the grip that it lacked in 07.
next stage is higher rates/bigger sqeeze , its business !
"Your mortgage is somebodies savings/investment, your company loans are somebodies savings/investment. Encouraging savings gives the bank the power to direct capitol rather than people squandering it on consumerism.If consumerism was such a great way to capitalise a country we would need the bank!"
I have a business. The money I make from that funds my mortgage and my business loans. Anything left over is used to live, to enjoy, to save/invest. Depending on what income others have they will do similar. When money is tight saving and enjoy are the first casualties. The products my business sells fits into the enjoy category. If consumers have to put extra into their mortgage my business suffers. The knock on effect is the business I buy descressionary items from suffers. To keep turnover up I reduce prices. Others business follow. Consumers, already streached, delay purchasing in the hope of getting products cheaper later. I cut costs and let staff go. Others do the same. Its a vicious circle of deflation. So why would I borrow knowing I can't pay it back. Banks full of money are usless to me or my customers.
So, to encourage spending and break the deflation cycle thats destroying my business the Central Bank run by Allmoyne puts interest rates up a % or to help me even more 2%. Thanks a lot Sir.
you obviously view ECB and FED policy as a sham and a recipe for trouble in the long run
just one thing however , if the current policy of low rates encourages " dumb money " to invest , are those people who since the onset of the credit crisis ( both here and in the usa ) have taken the decision to invest in equities as a result of believing there was no point in remaining in cash , are those folks dumb ?
The only saving that doesn't help growth is saving under the mattress which only happens in a low rate environment.
Your mortgage is somebodies savings/investment, your company loans are somebodies savings/investment. Encouraging savings gives the bank the power to direct capitol rather than people squandering it on consumerism. If consumerism was such a great way to capitalise a country we would need the bank!
People earn their money on a cost plus basis. Low rates takes the plus, and starves the system.
Banking isn`t working until it gets the cost plus balance right.Banking has the brakes full on at the moment to allow new restraints (taxes) in (without major complaint) before they raise rates and ,start to move again.
This is what makes bank of Ireland such a goldmine, it is about to leave the station, when the brakes get released (rates up).
Datafeed and UK data supplied by NBTrader and Digital Look.
While London South East do their best to maintain the high quality of the information displayed on this site,
we cannot be held responsible for any loss due to incorrect information found here. All information is provided free of charge, 'as-is', and you use it at your own risk.
The contents of all 'Chat' messages should not be construed as advice and represent the opinions of the authors, not those of London South East Limited, or its affiliates.
London South East does not authorise or approve this content, and reserves the right to remove items at its discretion.