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    A Question ?

    Do you think there is anyone out there who could replace Mervyn King?

    He says, 'because economic growth remains weak the Bank of England is unable to raise the base rate of interest to control inflation. Isn't that what got us into a mess in the first place?

    #2
    How about a cardboard cut out? It will cost very little, and cant do more damage.

    Comment


      #3
      Makes me wonder how these people hold on to their jobs for so long. It was the same with Gordon Brown. I was beginning to think they would have to drag him out kicking and screaming. But what do we get as a replacement? Nowt much better.

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        #4
        I've never understood how raising interest rates controls inflation. As business runs on credit, raising interest rates puts up the price of everything!
        sigpic

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          #5
          So, lets look at the idea of Quantitative Easing by the Band of England and cutting interests rates to encourage people to spend instead of saving.

          But, when the interest rates can drop no lower the banks the have to try quantitative easing to get people to spend. Banks buy assets - usually government bonds using money they have created out of thin air. I call it counterfeit money because its not been earned. Then they buy these bonds, usually from the private sector pushing up their value, making them more expensive to buy and so they become less attractive to investment. So, the company who sold the bones will invest the money in other companies or lend to individuals instead of buying more bonds.

          Comment


            #6
            Now lets look at the saver who has looked after his or her money. He or she buys a bond from their bank because its at a good interest rate. They my buy a bond for a year or more and wait for the interest to accumulate. When they have received their interest at the end of the period of time invested, then they will look at what they can spend it on. It might be a holiday. A cruise for instance. A new car etc, etc. But because they still have their money in the bank they can then reinvest it. So, it keeps the turn over going and their money remains in the bank. While they still have money to invest they don't need to be means tested and rely on government hand outs. It makes sense to me. But would does it make sense to Mervyn King? And none of their money has been manufactured out of thin air or counterfeited. Everything is done legally by the peasants.

            Comment


              #7
              You might even be able to accuse the government of money laundering.

              Comment


                #8
                Originally posted by Peterlg, Halifax View Post
                I've never understood how raising interest rates controls inflation. As business runs on credit, raising interest rates puts up the price of everything!
                It would seem that keeping interest rates low is keeping down the cost of cruises too. And if they had raised interest rates when the house prices started to rocket it would have kept the price of houses down and kept them affordable for the first time buyer.

                Comment


                  #9
                  I- am lost
                  Jim

                  Comment


                    #10
                    Originally posted by jimtheoldsalt, felixstowe View Post
                    I- am lost
                    Jim
                    Jim - you are not alone

                    Most of the 'money' created by QE has ended up boosting the banks' balance sheets and has not gone into the 'real' economy.

                    However I wish the 'real' economy would stand up

                    The economists, and sorry what do most of them know, predict the we will have negative growth in this quarter. However have you looked at the cars on the roads nowadays - well many people are doing very nicely thank you in this recession. There is money out there but not in the hands of the vast majority.

                    I repeat again - it is the youngsters I feel sorry for - house prices at relatively high levels, difficult to find a permanent full-time job etc.

                    Well I am no Mervyn King and no economist so I will stop.

                    Annie

                    Comment


                      #11
                      Originally posted by Foxtrot, Derby View Post
                      So, lets look at the idea of Quantitative Easing by the Band of England and cutting interests rates to encourage people to spend instead of saving.

                      But, when the interest rates can drop no lower the banks the have to try quantitative easing to get people to spend. Banks buy assets - usually government bonds using money they have created out of thin air. I call it counterfeit money because its not been earned. Then they buy these bonds, usually from the private sector pushing up their value, making them more expensive to buy and so they become less attractive to investment. So, the company who sold the bones will invest the money in other companies or lend to individuals instead of buying more bonds.
                      Since 2009 Pensioners received an artifical boost in the value of their pension because of Quantive easing, QE has also pushed up the price of bonds/gilts which are IOU'S issued by the government and are now artifically high.
                      If the bank ended QE it would cause the bonds to and their value to fall this could mean disaster for stock market-linked company pensions.
                      As for Govenorr of the Bank of England , I can't imagine anyone queueing up for it . but Mervyn King may have been cautious but a steady hand.CG
                      sigpic

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                        #12
                        So that is one group of people that has benefited from QE - pensioners?? That does not explain why annuity rates are plummeting??

                        I do agree with you I would not want MK's job.

                        Annie

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                          #13
                          But pensioners are losing on their savings too because of low interest rates. It would be nice if we could all get money from fresh air and invest it reaping in the rewards from interest rates. But the general public can't do that. Its not going to make work for people on the dole as more and more businesses go bust or take their businesses abroad for cheap labour. The government and Melvyn King are reaping their rewards from things they didn't do in the past, like keeping control of inflation. Its no good blaming house prices on the things that are happening aboard.

                          Comment


                            #14
                            An example:-

                            In the 1970's and 1980's passbook savings accounts paid much higher interest rates then the savings account of today, at times over 10%. The money in the account was used to lend to other bank customers in the form of mortgages, car loans and business loans, which generally carried a much higher interest rate. Consequently, passbook savings accounts were often the sole savings vehicle for average Americans whether it was for college tuition, a down payment or retirement. And not just for Americans either. That was how it was done. You didn't have to magic money from thin air.

                            Comment


                              #15
                              Originally posted by Foxtrot, Derby View Post
                              An example:-

                              In the 1970's and 1980's passbook savings accounts paid much higher interest rates then the savings account of today, at times over 10%. The money in the account was used to lend to other bank customers in the form of mortgages, car loans and business loans, which generally carried a much higher interest rate. Consequently, passbook savings accounts were often the sole savings vehicle for average Americans whether it was for college tuition, a down payment or retirement. And not just for Americans either. That was how it was done. You didn't have to magic money from thin air.
                              If you're going to 'cut and paste' [yes I know you missed a couple of words out, the odd 's' and the last three sentences are your own] it's usually good form to quote the source.
                              Edit
                              No problem doing this, but give credit where credit's due.
                              Last edited by Mrs M; 15th November 2012, 04:22 PM.

                              Comment


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