BOE 3rd November Rate Announcement

[jameswills]

DonkeyApple said:

Credit is essential.

Of the rest of the word soup in that long post, this is the only thing worth commenting on, and it outlines exactly the problem we’ve got with the current financial system. If that is true, the system is broken from the start.

[Scootersp]

ooid said:

Nothing dismissive or condescending really, I simply pointed out the list, can you see Russia, China, Turkey as the biggest gold buyers recently? Let's take Turkey for instance, closer to Europe ( so to speak). Run by a lunatic, no free speech, nearly 10 billion USD worth of local industrialists left the country in the last few years, huge debt and of course a mickey mouse currency (please google 1 USD to TRY and see the drop in the last 12 months). The least they can do just to buy more Gold to slow*down their currency becoming a toiler paper in a few months, rather than hours maybe ?

There is nothing wrong including Gold in a portfolio, it is a diversifier and that's it.

Now that's more like it, thanks. I just try and call out the more dismissive side as after your first comment I didn't really see you writing the last sentence above.

If it's a diversifier (I agree) then as the Turkish have done in certain circumstances it should perhaps be a more prominent part of where the 'money' goes. As a diversifier it will perform well when other more normal portfolio constituents underperform. It would have worked well for a Turk to have some Gold these last few years, one day it might work out well for us.

[jameswills]

I don’t think people realise how quickly we can go back down to base levels of trying to own something of value to stay alive. In today’s world of waving smart phones about to pay for things and gain entry, people seem to forget that only a few years ago people were on Aldi fighting over toilet roll. Owning actual money like cash, gold and silver will always trump a non physical entity of a bank balance because of the physiological and psychological association.

When the inevitable crash happens of today’s nonsense currency, we will go straight to physical entities for wealth and survival

[Hustle_]

Credit has been a thing for how many tens of thousands of years?

[jameswills]

Hustle_ said:

Credit has been a thing for how many tens of thousands of years?

Only since the 1970s has it been backed by nothing.

[OoopsVoss]

jameswills said:

Only since the 1970s has it been backed by nothing.

It's not backed by nothing. It's generally collaterilised, the problem is; if the underlying collateral value is inflated by supply of credit. Its a (non) virtuous circle (jerk).

OK, there is some capital required, but it's pretty small. If the assets underpinning leverage creation burn through any haircut AND capital you end up in a Lehman scenario, just the problem is bigger with more inter-connectedness.

It's called a doom-loop for a reason. Its almost impossible to stop, so everything possible will be done to prevent it.

Systemically the solution is gradually deleveraging, tactically the solution is what we see in CRE - extending debt maturities.

As much as people point to fractional reserve banking being an issue, the explosion of derivative use is as much an issue. Derivatives are centuries old

[ooid]

OoopsVoss said:

Systemically the solution is gradually deleveraging, tactically the solution is what we see in CRE - extending debt maturities.

Systemically is really old school indeed, agreeing on the debt mutually.

Tactically, CRE situation might have been correct as we saw now in the states, some subsidies announced from office to multi family dwellings. Same here, they did a bit of that with Canary Wharf Promise yesterday.

It will be expensive though, let's hope they did the maths properly.

[Panamax]

And so we arrive in another week where there may be significant decisions from some of the central banks. I'll be interested to see what happens.

Came across an interesting article in The Guardian a few days ago, titled "The damning truth about the UK’s 2% inflation target: it’s completely made up". Can be read on this link, https://www.theguardian.com/commentisfree/2024/feb...

Separately I saw on Sky News an interview with Mervyn King (former BoE governor) recorded back in 2022 and making similar points. https://news.sky.com/story/cost-of-living-bank-of-...

Sure, this burst of inflation was probably the result of excessive QE and excessively low interest rates. And hiking rates can lead to stagflation and possible deeper recession. But on balance I find myself becoming a little more optimistic that a soft landing may be achieved. A soft landing for the total economy, that is, albeit many people and businesses are having a very hard time indeed.

What continues to astound me is the combination of very high tax burden with constant deterioration of public services. It's difficult to see any exit from that situation while demand for and cost of healthcare/social housing/community support continue to rise inexorably. Then we get to significant questions around increased spending on the military....

[Terminator X]

Panamax said:

And so we arrive in another week where there may be significant decisions from some of the central banks. I'll be interested to see what happens.

Came across an interesting article in The Guardian a few days ago, titled "The damning truth about the UK’s 2% inflation target: it’s completely made up". Can be read on this link, https://www.theguardian.com/commentisfree/2024/feb...

Separately I saw on Sky News an interview with Mervyn King (former BoE governor) recorded back in 2022 and making similar points. https://news.sky.com/story/cost-of-living-bank-of-...

Sure, this burst of inflation was probably the result of excessive QE and excessively low interest rates. And hiking rates can lead to stagflation and possible deeper recession. But on balance I find myself becoming a little more optimistic that a soft landing may be achieved. A soft landing for the total economy, that is, albeit many people and businesses are having a very hard time indeed.

What continues to astound me is the combination of very high tax burden with constant deterioration of public services. It's difficult to see any exit from that situation while demand for and cost of healthcare/social housing/community support continue to rise inexorably. Then we get to significant questions around increased spending on the military....

Also 700k additional bodies coming in every year. Perhaps more tax but a significant extra burden on already over stretched services such as Hospitals, GP Surgeries, Dentists etc. Also houses built will never catch up with demand.

TX.

[Mr Whippy]

Panamax said:

And so we arrive in another week where there may be significant decisions from some of the central banks. I'll be interested to see what happens.

Came across an interesting article in The Guardian a few days ago, titled "The damning truth about the UK’s 2% inflation target: it’s completely made up". Can be read on this link, https://www.theguardian.com/commentisfree/2024/feb...

Separately I saw on Sky News an interview with Mervyn King (former BoE governor) recorded back in 2022 and making similar points. https://news.sky.com/story/cost-of-living-bank-of-...

Sure, this burst of inflation was probably the result of excessive QE and excessively low interest rates. And hiking rates can lead to stagflation and possible deeper recession. But on balance I find myself becoming a little more optimistic that a soft landing may be achieved. A soft landing for the total economy, that is, albeit many people and businesses are having a very hard time indeed.

What continues to astound me is the combination of very high tax burden with constant deterioration of public services. It's difficult to see any exit from that situation while demand for and cost of healthcare/social housing/community support continue to rise inexorably. Then we get to significant questions around increased spending on the military....

All that but somehow a soft landing?

All these dystopian visions of the future are the only outcome if we keep letting idiots accumulate wealth in one place at everyone else’s expense.

The poor are now, imo, anyone taking any benefits. And that keeps growing.

The super rich are getting much wealthier.

The middle are getting hammered into the poor category, slowly but surely.


The future is bleak and the slowly boiling a frog approach is the method, a decades long boom and bust, slowly lower and lower.


I’m all for optimism and building a better future for my kids, but while parasites infest government and allow crony capitalism there can be no optimistic outcome from all this.

We’re on a slide into the st. We’ll end up in the st.

[Scootersp]

Mr Whippy said:

All that but somehow a soft landing?

I thought that!

What does a soft landing look like even if they can pull it off? It won't fix anything just stop any major turmoil?

So we'd still have, very high consumer debt, Countries with very high debt to GDP (and no way to arrest it's continual increase?), high house price to earnings ratios, relatively high interest rates (I'm assuming they stay at/around this level), current and future generations still saddled with student loan debt/repayment obligations adding to the difficulties of the former points, and which won't help demographics improve, as who can have kids before 30 these days in the face of the above?

It's hard not to be at least a little pessimistic for the youth/uni goers isn't it?

[OoopsVoss]

Scootersp said:

Mr Whippy said:

All that but somehow a soft landing?

I thought that!

Soft landing is always what you want, achieving it; very difficult.

The US has recently looked like a soft landing was achievable- but the longer that inflation confounds expectations and the bigger macro / political situation deteriotes; the less likely it looks. They've also spanked their savings.

Economically the UK might be well positioned to do a soft landing (per Panamax). But we have a political vacuum of compatible levels to the US - and at bigger risk of external (US) influence (a double whammy).

But hey, fun and games this week. BoJ out of negative rates for the first time in 8 years? Possibly the most exciting thing (IF it happens), the other mains - a load of staying pat (I suspect)....

[ooid]

Today, the US yield curve has been inverted for longest since 1970s.

[asfault]

Mr Whippy said:

Panamax said:

And so we arrive in another week where there may be significant decisions from some of the central banks. I'll be interested to see what happens.

Came across an interesting article in The Guardian a few days ago, titled "The damning truth about the UK’s 2% inflation target: it’s completely made up". Can be read on this link, https://www.theguardian.com/commentisfree/2024/feb...

Separately I saw on Sky News an interview with Mervyn King (former BoE governor) recorded back in 2022 and making similar points. https://news.sky.com/story/cost-of-living-bank-of-...

Sure, this burst of inflation was probably the result of excessive QE and excessively low interest rates. And hiking rates can lead to stagflation and possible deeper recession. But on balance I find myself becoming a little more optimistic that a soft landing may be achieved. A soft landing for the total economy, that is, albeit many people and businesses are having a very hard time indeed.

What continues to astound me is the combination of very high tax burden with constant deterioration of public services. It's difficult to see any exit from that situation while demand for and cost of healthcare/social housing/community support continue to rise inexorably. Then we get to significant questions around increased spending on the military....

All that but somehow a soft landing?

All these dystopian visions of the future are the only outcome if we keep letting idiots accumulate wealth in one place at everyone else’s expense.

The poor are now, imo, anyone taking any benefits. And that keeps growing.

The super rich are getting much wealthier.

The middle are getting hammered into the poor category, slowly but surely.


The future is bleak and the slowly boiling a frog approach is the method, a decades long boom and bust, slowly lower and lower.


I’m all for optimism and building a better future for my kids, but while parasites infest government and allow crony capitalism there can be no optimistic outcome from all this.

We’re on a slide into the st. We’ll end up in the st.

The rich will always get richer but the middle should be getting bigger and the bottom end shouldnt be getting any poorer.

[OoopsVoss]

ooid said:

Today, the US yield curve has been inverted for longest since 1970s.

Think the cuts are a bit oversold for 2024, but when it goes - I think we're be seeing a few coming down the pipe quickly. I think they will also be expanding the Fed sheet - considerably. I can see a world where the BoE's sheet is close to zero by 2026, which will be vastly different to the Fed and ECB. Everyone will have a Trump issue by then, but suspect our headache - whilst considerable won't be anything like the Fed and ECB (the later need to be cutting now in preparation for the Tangerine Supremo).

And no surprises this AM when bank of Japan ended 8 years of negative rates.

[Mr Whippy]

asfault said:

Mr Whippy said:

Panamax said:

And so we arrive in another week where there may be significant decisions from some of the central banks. I'll be interested to see what happens.

Came across an interesting article in The Guardian a few days ago, titled "The damning truth about the UK’s 2% inflation target: it’s completely made up". Can be read on this link, https://www.theguardian.com/commentisfree/2024/feb...

Separately I saw on Sky News an interview with Mervyn King (former BoE governor) recorded back in 2022 and making similar points. https://news.sky.com/story/cost-of-living-bank-of-...

Sure, this burst of inflation was probably the result of excessive QE and excessively low interest rates. And hiking rates can lead to stagflation and possible deeper recession. But on balance I find myself becoming a little more optimistic that a soft landing may be achieved. A soft landing for the total economy, that is, albeit many people and businesses are having a very hard time indeed.

What continues to astound me is the combination of very high tax burden with constant deterioration of public services. It's difficult to see any exit from that situation while demand for and cost of healthcare/social housing/community support continue to rise inexorably. Then we get to significant questions around increased spending on the military....

All that but somehow a soft landing?

All these dystopian visions of the future are the only outcome if we keep letting idiots accumulate wealth in one place at everyone else’s expense.

The poor are now, imo, anyone taking any benefits. And that keeps growing.

The super rich are getting much wealthier.

The middle are getting hammered into the poor category, slowly but surely.


The future is bleak and the slowly boiling a frog approach is the method, a decades long boom and bust, slowly lower and lower.


I’m all for optimism and building a better future for my kids, but while parasites infest government and allow crony capitalism there can be no optimistic outcome from all this.

We’re on a slide into the st. We’ll end up in the st.

The rich will always get richer but the middle should be getting bigger and the bottom end shouldnt be getting any poorer.

Is that inflation corrected or not?

In any event covid boosted the right by 100%, put loads more into poor, and stripped the middle a good chunk.

Even going back to that point now would be great for society… but it seems you’re suggesting we can’t go back?

If that’s the case this trip only ends once the wheels of society come fully off.
I say that because if government can’t stand up for normal people, and instead just say “too big to fail’, all they’re capable of is perpetuating the “wealth drain” to the rich.

[Mr Whippy]

OoopsVoss said:

Scootersp said:

Mr Whippy said:

All that but somehow a soft landing?

I thought that!

Soft landing is always what you want, achieving it; very difficult.

Indeed.

Only once in the last 40 years have FRB rate cuts seen markets go higher in the following year, 1995.


All the other times rate cuts accompanied a reaction to something breaking… and that signalled bad times, not a front-running opportunity.


Even the spiky S&P500 needed 13 years and QE and rate cuts to reach the 2000 highs, in 2013.
They then needed to double the QE over the next 18 months to get the S&P to move further up.
Then the pandemic splurge.

Now the FRB is engaged in QT and rate tightening, and somehow “stocks” are surging again?! (Narrow range)
All on the basis of *after* it all blows up and goes wrong, they’ll dump $trillions into markets and peoples hands to keep the wheels on the bus… and this current market activity is front-running that outcome.

I won’t pretend I’m blasé about risk, I’d say I’m a cautious person to a fault.
But really? Is front running the next crash’s stimulus out other side now an investment strategy that pays off?

If so, and it does pay off, the end result will just be rampant inflation as no one sees any risks and only gains.

Which is why I’m not expecting it to pay off. Everyone can’t be a winner.

[Scootersp]

asfault said:

The rich will always get richer but the middle should be getting bigger and the bottom end shouldn't be getting any poorer.

Shouldn't being the operative word! How we achieve this is not by making/allowing the daily essentials, rent/mortgage, food and energy increase because as a percentage of peoples income this is more for those lower down and makes them poorer. Food and energy could triple and a millionaire/billionaire is barely inconvenienced, a very poor person makes decisions of either food or heating and those in the middle are in trouble if they used to live pay check to pay check, or otherwise are saving less, doing less as they have less disposable income. Hasn't this happened noticeably these last few years?

Not many of us have the ability to instantly increase our income either, if you are rich you often have passive income and can set the income level/prices you want, ok you won't necessarily get it but when it's rent etc the tenants can't easily refuse/leave and most stomach it. At the very least they are able to try, to chance their arm, to try and recoup the extra costs? Even if they can't it's very likely that they just make a little less than previous years, they will still be able to maintain their lifestyle, there is no chance of them having a real deficit year and dipping into savings, as they never spend close to what they earn every year.

At the bottom, food bank usage increased, reports of choosing between heating or eating (they have few immediate options - inheritance likely none)

Middle, significant belt tightening, mortgage term ending anxiety, real threats to household budget deficits, net savings reductions, often despite x2 full time working adults (limited options), retirement age extending, student loan periods extending (options limited - inheritance variable)
Wealthy, anxiety if over levered, anxiety of well paid job loss consequences, private school fees might have to go etc or are in a similar situation to the middle just up the scale a bit (some will have options but social status affecting ones - inheritance likely)
Very wealthy, those that live off non working income and so can accumulate more income earning assets each year without much effort, they are insulated from price rises, they can't really spend what they receive, worst case is probably they can't buy anymore assets, but the longer this continues the higher the chance that in time they can pick up cheaper assets as the middle (inheritance, significant and likely minimally taxed another boost to their relative wealth?)

[Ashfordian]

OoopsVoss said:

Think the cuts are a bit oversold for 2024, but when it goes - I think we're be seeing a few coming down the pipe quickly. I think they will also be expanding the Fed sheet - considerably. I can see a world where the BoE's sheet is close to zero by 2026, which will be vastly different to the Fed and ECB. Everyone will have a Trump issue by then, but suspect our headache - whilst considerable won't be anything like the Fed and ECB (the later need to be cutting now in preparation for the Tangerine Supremo).

And no surprises this AM when bank of Japan ended 8 years of negative rates.

Why are Central Banks going to cut interest rates from the current level and move back closer to emergency IR levels? Is there an economic emergency similar to what triggered the last move to emergency interest rates?

There is lots that need to be unwound from the last 16 years and because of the what has been built up by the system, they cannot do anything that risks spooking the markets or undermining confidence. And cutting IR's could certainly be taken as a negative by said markets.

[Panamax]

Scootersp said:

daily essentials, rent/mortgage, food and energy increase because as a percentage of peoples income this is more for those lower down and makes them poorer. At the bottom, food bank usage increased, reports of choosing between heating or eating

Not many of us have the ability to instantly increase our income either, if you are rich you often have passive income and can set the income level/prices you want,

Middle, significant belt tightening, mortgage term ending anxiety, real threats to household budget deficits, net savings reductions, often despite x2 full time working adults

I think that's the meat and drink of it. Seen from sufficient distance "the economy" might not look too disastrous but zoom in to any of the detail and there are real problems at ground level ..... where the voters live. Can't help wondering how many of them will be thinking, "Hey, this government's doing a great job, I'll vote for them again in autumn 2024".

Meanwhile we await further updates from the independent central banks as they continue their global high wire act.