The US economy
#33
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I'm always optimistic about that sort of thing. It helps I'm in Publishing as it seems to be one of those industries that never gets hit as badly as others, so I'm luckier than some.
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#34
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As its said, the stock market is the only place where, when there is a 20% sale, people run OUT of the door.
the slash in rates was more than I was anticipating and sooner. Part of me is thinking it may do more harm than good and it was too aggressive and sending backfiring signals. The denial of so long is loudly knocking at the door.
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#37
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Could someone explain the following to me ...
Some economics expert on the BBC News was saying that the BOE will not follow the Fed's example and slash interest rates. His explanation was that the Fed's mandate is to stimulate growth, and the BOE's mandate is to control inflation.
Now call me simple (go ahead, you were thinking it anyway), but I thought that inflation was related to cost of living - so why are most luxuries in the UK more expensive than in the US?![Confused](https://britishexpats.com/forum/images/smilies/confused.gif)
Some economics expert on the BBC News was saying that the BOE will not follow the Fed's example and slash interest rates. His explanation was that the Fed's mandate is to stimulate growth, and the BOE's mandate is to control inflation.
Now call me simple (go ahead, you were thinking it anyway), but I thought that inflation was related to cost of living - so why are most luxuries in the UK more expensive than in the US?
![Confused](https://britishexpats.com/forum/images/smilies/confused.gif)
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#38
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Could someone explain the following to me ...
Some economics expert on the BBC News was saying that the BOE will not follow the Fed's example and slash interest rates. His explanation was that the Fed's mandate is to stimulate growth, and the BOE's mandate is to control inflation.
Now call me simple (go ahead, you were thinking it anyway), but I thought that inflation was related to cost of living - so why are most luxuries in the UK more expensive than in the US?![Confused](https://britishexpats.com/forum/images/smilies/confused.gif)
![Blink](https://britishexpats.com/forum/images/smilies/blink.gif)
Some economics expert on the BBC News was saying that the BOE will not follow the Fed's example and slash interest rates. His explanation was that the Fed's mandate is to stimulate growth, and the BOE's mandate is to control inflation.
Now call me simple (go ahead, you were thinking it anyway), but I thought that inflation was related to cost of living - so why are most luxuries in the UK more expensive than in the US?
![Confused](https://britishexpats.com/forum/images/smilies/confused.gif)
![Blink](https://britishexpats.com/forum/images/smilies/blink.gif)
Hope that helps.
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#39
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Inflation is independent of cost of living. Inflation is defined in the overall increase of prices of goods and services overtime. One index that is used in computing this is the Consumer Price Index (CPI). I think what you have is two methodologies into play. The Fed uses the Keynesian Theory that money supply, which is increased with a lowering of interest rates, is not as important to inflation as demand. The BOE utilizes the Monetarist Theory that places great importance on the money supply causing inflation.
Hope that helps.
Hope that helps.
Now my head REALLY hurts .....
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#41
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Could someone explain the following to me ...
Some economics expert on the BBC News was saying that the BOE will not follow the Fed's example and slash interest rates. His explanation was that the Fed's mandate is to stimulate growth, and the BOE's mandate is to control inflation.
Now call me simple (go ahead, you were thinking it anyway), but I thought that inflation was related to cost of living - so why are most luxuries in the UK more expensive than in the US?![Confused](https://britishexpats.com/forum/images/smilies/confused.gif)
![Blink](https://britishexpats.com/forum/images/smilies/blink.gif)
Some economics expert on the BBC News was saying that the BOE will not follow the Fed's example and slash interest rates. His explanation was that the Fed's mandate is to stimulate growth, and the BOE's mandate is to control inflation.
Now call me simple (go ahead, you were thinking it anyway), but I thought that inflation was related to cost of living - so why are most luxuries in the UK more expensive than in the US?
![Confused](https://britishexpats.com/forum/images/smilies/confused.gif)
![Blink](https://britishexpats.com/forum/images/smilies/blink.gif)
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#42
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The 0.75% rate cut is huge, a highly unusual and overtly drastic move. Frankly, I think it sends a negative signal to the markets that will undermine confidence in the US economy. There's no reason for the Bank of England to emulate that.
The BOE doesn't need to follow because the mortgage meltdown in the UK is not as bad as what you'll find here, at least not yet.
In any case, there is a basic misunderstanding of interest rates. Governments have only so much control over them, ultimately market forces will determine the price of money. The government can't just magically set interest rates, the invisible hand won't allow for that.
Personally, I don't think that the rate cuts will help much. The problem hasn't been with the cost of capital, but with the availability of capital. Capital has fled the markets, so there just isn't that much to borrow, at any price.
It's a classic credit crunch. Ironically, it may actually get worse as a result of this move, because some of the lenders who have been staying on the sidelines while rates were low had been reentering the market, but may withdraw if their yields go down.
This is going to be a rough ride. I've been predicting this for sometime, and it's playing out largely as I expected it. As far as I see, the bottom is not here yet, and it will take some time to hit it. (I'll guess 2009-10, but that's just a guess.)
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#43
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Not quite sure about that. Since Paul Volcker became Fed chairman in 1979, monetarism has been king, and Keynesian economics is dead.
The 0.75% rate cut is huge, a highly unusual and overtly drastic move. Frankly, I think it sends a negative signal to the markets that will undermine confidence in the US economy. There's no reason for the Bank of England to emulate that.
The BOE doesn't need to follow because the mortgage meltdown in the UK is not as bad as what you'll find here, at least not yet.
In any case, there is a basic misunderstanding of interest rates. Governments have only so much control over them, ultimately market forces will determine the price of money. The government can't just magically set interest rates, the invisible hand won't allow for that.
Personally, I don't think that the rate cuts will help much. The problem hasn't been with the cost of capital, but with the availability of capital. Capital has fled the markets, so there just isn't that much to borrow, at any price.
It's a classic credit crunch. Ironically, it may actually get worse as a result of this move, because some of the lenders who have been staying on the sidelines while rates were low had been reentering the market, but may withdraw if their yields go down.
This is going to be a rough ride. I've been predicting this for sometime, and it's playing out largely as I expected it. As far as I see, the bottom is not here yet, and it will take some time to hit it. (I'll guess 2009-10, but that's just a guess.)
The 0.75% rate cut is huge, a highly unusual and overtly drastic move. Frankly, I think it sends a negative signal to the markets that will undermine confidence in the US economy. There's no reason for the Bank of England to emulate that.
The BOE doesn't need to follow because the mortgage meltdown in the UK is not as bad as what you'll find here, at least not yet.
In any case, there is a basic misunderstanding of interest rates. Governments have only so much control over them, ultimately market forces will determine the price of money. The government can't just magically set interest rates, the invisible hand won't allow for that.
Personally, I don't think that the rate cuts will help much. The problem hasn't been with the cost of capital, but with the availability of capital. Capital has fled the markets, so there just isn't that much to borrow, at any price.
It's a classic credit crunch. Ironically, it may actually get worse as a result of this move, because some of the lenders who have been staying on the sidelines while rates were low had been reentering the market, but may withdraw if their yields go down.
This is going to be a rough ride. I've been predicting this for sometime, and it's playing out largely as I expected it. As far as I see, the bottom is not here yet, and it will take some time to hit it. (I'll guess 2009-10, but that's just a guess.)
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#44
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Yep, this has many years to play out, imo. The housing stuff has been predictable since at least '05, imo, the degree of spillover into the rest of the economy less so.
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#45
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Not quite sure about that. Since Paul Volcker became Fed chairman in 1979, monetarism has been king, and Keynesian economics is dead.
The 0.75% rate cut is huge, a highly unusual and overtly drastic move. Frankly, I think it sends a negative signal to the markets that will undermine confidence in the US economy. There's no reason for the Bank of England to emulate that.
The BOE doesn't need to follow because the mortgage meltdown in the UK is not as bad as what you'll find here, at least not yet.
In any case, there is a basic misunderstanding of interest rates. Governments have only so much control over them, ultimately market forces will determine the price of money. The government can't just magically set interest rates, the invisible hand won't allow for that.
Personally, I don't think that the rate cuts will help much. The problem hasn't been with the cost of capital, but with the availability of capital. Capital has fled the markets, so there just isn't that much to borrow, at any price.
It's a classic credit crunch. Ironically, it may actually get worse as a result of this move, because some of the lenders who have been staying on the sidelines while rates were low had been reentering the market, but may withdraw if their yields go down.
This is going to be a rough ride. I've been predicting this for sometime, and it's playing out largely as I expected it. As far as I see, the bottom is not here yet, and it will take some time to hit it. (I'll guess 2009-10, but that's just a guess.)
The 0.75% rate cut is huge, a highly unusual and overtly drastic move. Frankly, I think it sends a negative signal to the markets that will undermine confidence in the US economy. There's no reason for the Bank of England to emulate that.
The BOE doesn't need to follow because the mortgage meltdown in the UK is not as bad as what you'll find here, at least not yet.
In any case, there is a basic misunderstanding of interest rates. Governments have only so much control over them, ultimately market forces will determine the price of money. The government can't just magically set interest rates, the invisible hand won't allow for that.
Personally, I don't think that the rate cuts will help much. The problem hasn't been with the cost of capital, but with the availability of capital. Capital has fled the markets, so there just isn't that much to borrow, at any price.
It's a classic credit crunch. Ironically, it may actually get worse as a result of this move, because some of the lenders who have been staying on the sidelines while rates were low had been reentering the market, but may withdraw if their yields go down.
This is going to be a rough ride. I've been predicting this for sometime, and it's playing out largely as I expected it. As far as I see, the bottom is not here yet, and it will take some time to hit it. (I'll guess 2009-10, but that's just a guess.)
Okay.....someone has been watching CNBC too much!
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Of course one can't really simplify the current economy to A+B=C outcome. It's much more complex than that. There is the issue concerning housing starts, unemployment, trade deficits, deficit spending, irresponsible mortgage lending practices. All of this getting us to our current situation.
I think that what the Fed accomplished today was to stave of negative sentiment for a few moments for overseas markets to get themselves together and the domestic investors to show more confidence in the direction of where our economy is going.
The current stimulus package on the table is definitely a bandage but it will personally make me feel better about my fiscal future as I finally get rid of the only credit card I have, that's if the current rate of $1,600 rebate will be issued in the future.
In summary, what's occurred is a little booster shot in an economy that's in desperate need of new tax legislation, better oversight with lending practices, and proactive leadership.
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