Interest rates?

[R1Geezer]

OK infaltion is double what it should be, even after 10 years of government taking out anything that raises the figure so gawd knows what the true rate is, anyway, I digress. To control infaltion, interest rates must rise, however in the current climate that could tip us into recession, increase reposession, heap misery on millions but in the long run inflation is equally as dangerous so people, what is the lesser of these 2 evils?

[Gromit]

Do nothing and bribe us with a juicy tax cut.

http://www.epolitix.com/latestnews/article-det ail/newsarticle/national-union-of-labour-stude nts-article-1/

[R1Geezer]

that wasn't one of the choices Gromit. Now read it very slowly and have another go.

[Gromit]

Read my answer again.

Do nothing. - Precisely what the BoE have opted for.

[cazzz1975]

they should raise rates, time to get back to normal, the house prices are artificially high, people cannot stop spending money on crap.

okay it means that things will be tough but we will get back to normal quicker, we are going into recession either way. time to stop spending what we cannot afford

[R1Geezer]

No Gromit, doing nothing is allowing inflation to go unchecked, that's the whole point. They would raise them like a shot without the worry of the other effects. They really need to be at least 2 points higher but that would be very painful to borrowers so they won't.

[Gromit]

The present inflation is driven by food and fuel increases which will not be checked by raising interest rates. Interest rates will need to rise, but the longer you can avoid doing that, the better.

The best way out of recession (negative growth) is to have cheap money around, not more expensive money.

[cazzz1975]

surely that have to raise interest rates to curb spending, people have borrowed way too much and now its time to pay the piper.

this country barely makes anything so there is hardly any money coming into the country, too many cheap imports thus the money going out of the country

[Rollo]

Inflation is caused by one thing - too much money available to buy too few goods.

Having lived on borrowed money for years and years - money that does not really exist, but which is just "created" either by the Government of by the banks making simple book entries - the chickens are now coming home to roost.

[Gromit]

It is difficult for the Government to influence the price we are paying for food and fuel as both are demand led pricing, and set on world markets rather than in the UK. Unfortunately, it is the steep rise in food and fuel which is causing inflation to rise.

http://www.guardian.co.uk/business/2008/jul/16 /inflation.consumeraffairs

The credit crunch means that banks and other lending institutions are reluctant to lend money leading to stagnation and recession. Personal debt needs to be reined in, but the present credit crunch means that entrepeneurs and viable business are unable to get money and that is the cause of stagnation.

http://www.guardian.co.uk/commentisfree/2008/j an/02/stagflationcometh

[jake-the-peg]

Inflation is being caused by increased oil prices.

High oil prices puts up everything. Everthing needs energy to manufacture, everything needs oil to be transported.

Yes I know it's dropped back a little recently but it's still over $100 a barrel.

Increasing interest rates won't affect that much.

So I think you're fundamentally wrong about raising interest rates.

Interest rates must fall. Falling interest rates puts more money into peoples hands in a rising economy that can lead to more spending and inflation but in the current circumstances that won't happen.

Dropping interest rates will also decrease the value of the pound which will make our goods and services more attractive to overseas buyers putting more money into the economy.

[rov1200]

You have to ask yourself why Britain is such a high interest rate society. Loans taken out in Europe, Japan and America have allways been below ours. Could it be the high level of borrowing over the past years. The mortgage market is said to be in trillions of �'s. Savings are at an all time low. Credit card purchases are reaching a ceiling what people can afford to pay back. The government are now in hock to borrow over 40% of the nations income.

Inflation is good for homeowners as the amount owed is quickly reduced by inflation, ask anyone who's house cost just �10,000 twenty years ago.

Basically the lenders want low inflation, the borrowers want higher inflation and the lenders are winning at the moment.

[cazzz1975]

what goods and services, do we still make anything in this country apart from loan applications

[Gromit]

Your concept of what is saleable needs to change. 50 years ago we might have built engines and sold them all over the world, today it is many thing. Football for example,

The English Premier League earns �2billion annually from worldwide sales.

[vehelpfulguy]

>The English Premier League earns �2billion annually from worldwide sales.

But that all goes on Ronaldo's salary.

[vehelpfulguy]

>OK infaltion is double what it should be,

This is an interesting statement.

I did not realise that inflation was supposed to "be" any particular amount, so how can it be twice that.

There is a figure that the government say they expect it to be, but in an ideal world it would be zero.

[Gromit]

Which he spends and pays tax on in the UK.

[jake-the-peg]

Well it is "supposed to be" below 3% that is when the Governer of the BoE is meant to write an open letter saying what he plans to do about it

[cazzz1975]

sums it up really when we have to use football as an industry

[Gromit]

^
Beats slavery.