Maybe if the U.K. were to go first, then the current crop of U.S. monetarists-in-charge would be more likely to raise here.
U.K. braces for a rate hike never experienced by young debtors http://t.co/FoPbiZ5IB9
— Patrick Gower (@PatrickGower) August 3, 2015
7 comments:
I think there is a lot of 'expectation management' going on in the UK.
If the UK raised rates the housing market would likely collapse completely.
Thanks for the view from the ground over there Neil... I think there are fears like that operating here also...
I just thought that if "someone else went first" it might give our monetarist morons here some sort respite from those fears and they might be more apt to raise...
rsp,
Matt this is not good for most people, they cannot afford a rate hike. Remember 90% of the population, specially the young one, lives one paycheck away of poverty and has way more liabilities than assets (at best they don't have either assets nor liabilities). A collapse of the current housing mini-bubble will throw a lot of people under water again, and we live ina world of 'austerity' so there is not going to be QE or the people.
Most people does not have "savings" or instruments which generate a rent in any significant way to offset mortgages, and hence are not going to benefit from a rate hike now, equities are not going to raise significantly (probably the contrary). Adding to this that "trickle down" does actually not trickle down...
TLDR: the interest income channel is broken except for 1% of the population, raising rates would probably hurt more than help at this point.
Negative rates punish currency hoarding. I think there is a good case to be made for negative rates to discourage negative sum trade, where countries seek financial, real and strategic advantages by hoarding currency to manipulate their terms of trade and then pass on instability and to their neighbors. Germany - Greece being case in point. Negative rates would allow countries like Germany to export to Greece in perpetuity while the debt burden on Greece would automatically adjust and diminish over time. The Germans would effectively have to pay the Greek for the privilege of access to their markets. Greek companies in essence would be paid by Germans to invest capital and close the productivity gap.
Negative rates (some sort) was advocated by Gesell to force circulation of money. It's being tried to a point in Europe, but because those are on reserves it does nothing really in practice.
I don't think negative rates on deposits above a quantity are politically viable.
Points taken but I am still of the belief that (SHORT TERM) a rate rise will be helpful if we dont get more qualified people in the policymaking positions.... iow as long as the morons are in charge (which doenst look to change any time soon...) I think higher rates will help...
Agree it is not the best LONG TERM solution and would not best be used by more qualified/non-moron persons....
If the UK raised rates the housing market would likely collapse completely.
That goes double for Canada.
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