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Inflation and Interest Rates


Mick Mac

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Don't understand the logic really. Prices are rising but its not due to consumer confidence. Far from it. Surely any interest rise will hit people hard. But the mortgage companies have already begun pulling fixed deals in anticipation of a rate rise.
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Rates are going up innit.


lots of cash slopping about & is all going elsewhere


The Carry trade is killing the western currencies and by default driving up commodities.Not that there is actually any more real demand for commodities, but with the purposeful pegging of the Yuan & manipulation of chinese interest rates, it not hard to see why.


Inflation per se isnt the worry here, the assumption that high inflation is always bad, is not correct but it is a headline grabber and the Government BoE understand that .


innit

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  • 3 weeks later...

Don't understand the logic really. Prices are rising but its not due to consumer confidence. wrote Mick Mack.



It is not difficult if you remember 'quantative easement' Mick, devaluing by any other name, flooding water marked printed paper, in place of money.

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Loz: "A lot of it is being caused by the weakness of the pound, world food costs and energy prices, rather the economy bubbling over. I think a rise is unlikely."


I think that's spot on, however a raise in interest rates would strengthen the pound and reduce food and energy costs as a proportion of individual income, helping out the 'renting' (as opposed to mortgaged) classes.


Except, it would make exports more expensive to foreign markets, reducing demands on British industry, leading to job cuts that would disproportionately hurt the low skilled 'renting' classes.


etc. etc.


Not easy to govern financial policy...

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Sorry, but are you being deliberately obtuse Mick Mac? Attempting to restrict the money supply in order to control inflation was the basis of Tory economic policy in the early 80's, called the MTFS it failed and manipulating interest rates eventually became the main method used.
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