Bank Of England Warns Of 'financial Storms'

[Lxxx]

The place to be buying a house and emigrating to are places like Brazil, one of the next wave of emerging economies. China has already been built up to the be the engine room of the next phase of globalisation, the US has served it's purpose for manufacturing now, China has a billion people who are willing to work for peanuts, no trade unions or employee rights there.

The west will be a shadow of what it was, and its occupants will have to adjust there standard of living accordingly. There are gonna be tough times ahead, hence the reason for the ever increasing police states, as once the populace realise there materialistic, debt-fuelled, 'buy now pay later' lifestyles are being curtailed, we'll see riots and an uprising to a certain degree. This has been coming down the track for years, don't think the central planners haven't made provisions for it.

G Kelly has made a good point about us having to adjust as we haven't known real hardship for a couple of generations. I've started adjusting now so it's not as much of a shock to my family when the sh*t really hits the fan and inflation rises well into double digits, with interest rates to match, as you can't print endless amounts of currency and not have those two going hand in hand.

[Cambon]

G Kelly has made a good point about us having to adjust as we haven't known real hardship for a couple of generations. I've started adjusting now so it's not as much of a shock to my family when the sh*t really hits the fan and inflation rises well into double digits, with interest rates to match, as you can't print endless amounts of currency and not have those two going hand in hand.

Interesting Lxxx. High interest rates are the uk's way out of this, and the sooner the better. I have been saying this for years. Gordon Brown's policy of artificially low inflation and low interest rates are the largest part of the cause of the uk's problem. If uk put interest rates up to, lets say, 6% now, Money would absolutely flood into the country. It would cause hardship in some sectors for a year or two until the tax money started rolling into the government and they could start spending on infrastructure.

[Lxxx]

It'll be a massive slap in the face for all those people who borrowed way above their means in the boom years, and will now see their chickens come home to roost bigtime when it's time to pay it back whilst high interest rates and inflation erode their ability to maintain the same standard of living.

Of course they were encouraged to do so by the banks due to the wonder of fractional reserve banking, as for every £100k of mortgage they doled out to the unsuspecting public they could leverage that up so they get £900k to play with in the casino money markets........and we wonder who really runs the world, bankers or politicians.

[Cambon]

This is true. But had interest rates stayed at a reasonable level, there would not have been the house price bubble that there is now. Less money put out in mortgages means less leverage to play with. But is was the politicians (brown in particular) who kept interest rates ridiculously low, whilst artificially keeping inflation low. He did this to achieve sustained growth. But growth goes in cycles of 5-7 years, and then it goes bust, and growth starts again. Regardless of any other problems anywhere else in the world, the bubble that brown built up over that 12 year period was going to blow big time.

 

The thing is now, we may as well put the rates up. The Eurozone is either going to collapse, split in two or print so much money that the sterling/euro rate will be dire for trading with them.

[Albert Tatlock]

Even with the extent of the Euro-crisis - the pound has kept pace fairly much with the Euro. Personally I see them sinking together, as the UK/EU is inextricably market linked.

 

As for growth, it doesn't have to go in 5-7 year cycles - just look at the emerging markets - people that make things, don't waste their money on selling their own bricks and mortar to each other, don't have 95% of their population employed as middlemen, and don't borrow against anything intangible.

 

Until the UK/EU problems sort themselves out, personally I can't see interest rates rising for around 2 years. But I can see inflation rising. I don't think people will be buying pounds once the attention and focus comes of the EU and they realise the actual state of the UK economy.

[G_Kelly]

The place to be buying a house and emigrating to are places like Brazil, one of the next wave of emerging economies. China has already been built up to the be the engine room of the next phase of globalisation, the US has served it's purpose for manufacturing now, China has a billion people who are willing to work for peanuts, no trade unions or employee rights there.

 

 

I think you over estimate china,

They are having massive problems with there work force there at the moment, Wanting more wages, better working cond etc etc. There trying to turn away from the manufacturing into high skilled jobs that are well payed,

They will allways be a force for manufacturing, but the cheap products from the far east will never be like it was in its hay day, But can see it now moving into the high value service provides, hi-tech etc industrys in the next 10-15 years.

[Lxxx]

As a percentage of debt to GDP the UK is in a worse position than most of europe, it's just that focus hasn't reached them, yet. The feeding frenzy has been centred on the eurozone but once it does, the bond vigilantes will tear the UK to shreds like they have done to Greece, Portugal and Italy.

Plus the fact that if/when the euro fails the UK banks are so intertwined with the rest that they'll take a hit whatever happens. So the UK has massive problems in the pipeline for the next few years.

 

With regards to China they are already becoming a force in the hi-tech industries, plus the fact that the western bankers have recently set up a huge commodities exchange in Hong Kong to rival the LBMA so they are clearly planning for the economic forces moving eastwards in the next few years.

 

I can't see an end to this downward spiral of debt across the whole aboard, therefore it would not surprise me in the slightest to see a complete curveball thrown into the mix to divert the attention away from the whole thing imploding, I seem to remember something like this happening during the great depression of the 1930's, and we all know what came next.....maybe the Iran 'incident' was a pre-cursor to the main event.

[eric76]

Gordon Brown's policy of artificially low inflation and low interest rates are the largest part of the cause of the uk's problem.

 

Artificially low inflation? Inflation is nothing more than theft from the frugal who save their money.

 

The phrase "artificially low inflation" is the same as thing as "artificially low theft".

[Lxxx]

Inflation is theft by stealth I agree. The sad thing is most don't even realise it as they're not fiscally savvy enough to understand, but if someone was to mug them every month they'd soon spot the money going missing.

[Cambon]

Artificially low inflation? Inflation is nothing more than theft from the frugal who save their money.

 

The phrase "artificially low inflation" is the same as thing as "artificially low theft".

You could argue it that way. However, by keeping inflation artificially low and leaving interest rates low, it left people with lots of money to spend, and the ability to borrow lots more. This in turn created the housing bubble, which is about to leave people with lots of negative equity type debt due to "real inflation" which is starting to hit. So effectively, it was not "artificially low theft", just "delayed theft" that gordon brown and labour would not have to deal with.

[Lxxx]

Artificially low inflation? Inflation is nothing more than theft from the frugal who save their money.

 

The phrase "artificially low inflation" is the same as thing as "artificially low theft".

You could argue it that way. However, by keeping inflation artificially low and leaving interest rates low, it left people with lots of money to spend, and the ability to borrow lots more. This in turn created the housing bubble, which is about to leave people with lots of negative equity type debt due to "real inflation" which is starting to hit. So effectively, it was not "artificially low theft", just "delayed theft" that gordon brown and labour would not have to deal with.

 

True, but placed with the prospect of virtually free money being thrown at them from every direction, and being conditioned by government, the finance industry and the media that it's okay to take it, it would have taken a strong-willed person to buck the social trend and decline in favour of sensible living. I'm not sure many did.

[Cambon]

True, but placed with the prospect of virtually free money being thrown at them from every direction, and being conditioned by government, the finance industry and the media that it's okay to take it, it would have taken a strong-willed person to buck the social trend and decline in favour of sensible living. I'm not sure many did.

Hence, today's problems.

 

I still think the uk's best policy is to put rates up and let the economy get on with it (the recession). Had they done this in 2009, I reckon the recession would be over now for uk. Yes, it would have been a seriously tough couple of years, but that is going to happen sooner or later anyway. We all know that. Surely it is better for a country's own government to control that than have it forced on them by others?

[wheels]

We have been spoilt for 15-20 years of the easy life, we do not know what hardship really is.

[Lxxx]

True, but placed with the prospect of virtually free money being thrown at them from every direction, and being conditioned by government, the finance industry and the media that it's okay to take it, it would have taken a strong-willed person to buck the social trend and decline in favour of sensible living. I'm not sure many did.

Hence, today's problems.

 

I still think the uk's best policy is to put rates up and let the economy get on with it (the recession). Had they done this in 2009, I reckon the recession would be over now for uk. Yes, it would have been a seriously tough couple of years, but that is going to happen sooner or later anyway. We all know that. Surely it is better for a country's own government to control that than have it forced on them by others?

 

Unfortunately I think there are more pressing matters at hand, like keeping the whole system afloat just from week to week. Last Wednesday's desperate attempt to shore up the european markets by all of the world major central banks should have sent alarm bells ringing everywhere, to people who follow this. By allowing access to cheap dollars immediately it allegedly let one of France's largest banks (probably BNP as they're virtually insolvent) carry on trading as they could not get any liquidity from the markets to service it's next day operation. This would have set off a chain reaction that would have blown up the whole system as the large French banks have more assets on their balance sheets than the whole French economy, such is the farcical nature of the industry at present!

 

I think when old Mervyn warned us it was going to get messy, he wasn't kidding, he was telling us all what to potentially expect any day soon, the sad thing is most will have turned over to catch the end of Eastenders instead of listening to the doddering old fart.

[When Skies Are Grey]

Rates held at 0.5% (unchanged since March 2009)