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"Anyone else struggling to understand why the BoE is responding to artificially induced inflation by raising interest rates? Economists are predicting interest rates doubling by May 2023 in an effort to curb inflation. The problem as I see it is that inflation is not being generated organically, it is almost wholly a direct result two issues. 1) Rising energy costs which itself is a consequence of a war and as opposed to organically generated demand. 2) Brexit related pinch points at the border. Rising interest rates won’t stop the war and the Government can act to reduce the pinch points. I see an incompetent BoE responding organically to non-organic inflation and actually making the problem worse, not better." higher interest rates are better for savers. | |||
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" higher interest rates are better for savers." Doubtful there'll be any one with savings over after February's gas bill hits the mat | |||
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"Anyone else struggling to understand why the BoE is responding to artificially induced inflation by raising interest rates? Economists are predicting interest rates doubling by May 2023 in an effort to curb inflation. The problem as I see it is that inflation is not being generated organically, it is almost wholly a direct result two issues. 1) Rising energy costs which itself is a consequence of a war and as opposed to organically generated demand. 2) Brexit related pinch points at the border. Rising interest rates won’t stop the war and the Government can act to reduce the pinch points. I see an incompetent BoE responding organically to non-organic inflation and actually making the problem worse, not better." How does organic supply shortage and inorganic supply shortage matter here? In the end, we do not have supply that matches the demand. So interest rates have to be increased to reduce the money in circulation. | |||
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" So interest rates have to be increased to reduce the money in circulation. " Pretty sure the gas bills will be doing that, and with much less lag than interest rates | |||
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" So interest rates have to be increased to reduce the money in circulation. Pretty sure the gas bills will be doing that, and with much less lag than interest rates " No. When you pay money to buy something, the money is still in circulation. | |||
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" So interest rates have to be increased to reduce the money in circulation. Pretty sure the gas bills will be doing that, and with much less lag than interest rates No. When you pay money to buy something, the money is still in circulation." It's not though is it, once it's in the hands of BP shareholders it won't be recycled around the economy like a retail purchase would | |||
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" So interest rates have to be increased to reduce the money in circulation. Pretty sure the gas bills will be doing that, and with much less lag than interest rates No. When you pay money to buy something, the money is still in circulation. It's not though is it, once it's in the hands of BP shareholders it won't be recycled around the economy like a retail purchase would " Even if shareholders make profits, they don't keep them in banks. They usually invest the money somewhere. The money is still in circulation. | |||
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" So interest rates have to be increased to reduce the money in circulation. Pretty sure the gas bills will be doing that, and with much less lag than interest rates No. When you pay money to buy something, the money is still in circulation. It's not though is it, once it's in the hands of BP shareholders it won't be recycled around the economy like a retail purchase would Even if shareholders make profits, they don't keep them in banks. They usually invest the money somewhere. The money is still in circulation." So I did very, very elementary economics at A-Level but the one thing that I remember is that national economies can only work if local economies are thriving. This means that investments and spending locally translate nationally into a successful economy. The issue with large dividend payouts is that the big investors are generally corporate and the big money goes into offshore accounts, yachts and overseas property. If you enable ordinary people to spend money, mostly they spend it locally and if in the local market there are small traders and local businesses then the local economy thrives. Our system is completely broken and skewered in favour of cash returns without productive output. | |||
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" higher interest rates are better for savers. Doubtful there'll be any one with savings over after February's gas bill hits the mat" Not only cost of living, energy and now unaffordable mortgages. It should have been frozen as circumstances causing it is not usual. More homeless after Christmas.. | |||
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" So interest rates have to be increased to reduce the money in circulation. Pretty sure the gas bills will be doing that, and with much less lag than interest rates No. When you pay money to buy something, the money is still in circulation. It's not though is it, once it's in the hands of BP shareholders it won't be recycled around the economy like a retail purchase would Even if shareholders make profits, they don't keep them in banks. They usually invest the money somewhere. The money is still in circulation. So I did very, very elementary economics at A-Level but the one thing that I remember is that national economies can only work if local economies are thriving. This means that investments and spending locally translate nationally into a successful economy. The issue with large dividend payouts is that the big investors are generally corporate and the big money goes into offshore accounts, yachts and overseas property. If you enable ordinary people to spend money, mostly they spend it locally and if in the local market there are small traders and local businesses then the local economy thrives. Our system is completely broken and skewered in favour of cash returns without productive output. " Do you have any evidence to prove that most of the investors who get paid in dividends just park their money in offshore accounts? Some of them might have some money parked there as savings. But it's a financially wrong move to just have your money parked like that. It's normally good for ordinary people to spend their money. But when supply of goods is in shortage, what do you expect them to spend their money on? | |||
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"The BoE are looking after their banker mates. Higher interest rates will lead to record profits for the banking sector as debt becomes more expensive. However, it will ultimately impact on businesses who will not be able to afford to invest (or even survive their own energy price increases). Once again we are being screwed by the banking system! Check out Japan’s approach. No interest rate charges there!" Raising interest rates during inflation is something that almost every country does. You will see direct correlation between a country's inflation and interest rates. High interest rates means less number of people taking loans. From a bank's perspective it's not really profitable. Interesting that you would randomly throw Japan's name without reading about their economic situation. The country has been suffering from deflation for a couple of decades now. So inflation is seen as a welcome change there. There is lot the UK could learn from Japan on how to run a free market economy. But inflation is not it because their situation is different. | |||
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"The BoE are looking after their banker mates. Higher interest rates will lead to record profits for the banking sector as debt becomes more expensive. However, it will ultimately impact on businesses who will not be able to afford to invest (or even survive their own energy price increases). Once again we are being screwed by the banking system! Check out Japan’s approach. No interest rate charges there! Raising interest rates during inflation is something that almost every country does. You will see direct correlation between a country's inflation and interest rates. High interest rates means less number of people taking loans. From a bank's perspective it's not really profitable. Interesting that you would randomly throw Japan's name without reading about their economic situation. The country has been suffering from deflation for a couple of decades now. So inflation is seen as a welcome change there. There is lot the UK could learn from Japan on how to run a free market economy. But inflation is not it because their situation is different." Normally inflation is driven by overheated economies and excessive consumer spending. We are in different territory with the cost of living crisis being driven by supply side issues. A different approach is needed. BTW the commercial banks have c.£900billion on deposit with the BoE. How much is that costing to UK Govt (ie taxpayers) in interest payments? What happens when the base rate rises? Don’t tell me the banks won’t be creaming in the profits (for doing absolutely nothing). | |||
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"The BoE are looking after their banker mates. Higher interest rates will lead to record profits for the banking sector as debt becomes more expensive. However, it will ultimately impact on businesses who will not be able to afford to invest (or even survive their own energy price increases). Once again we are being screwed by the banking system! Check out Japan’s approach. No interest rate charges there! Raising interest rates during inflation is something that almost every country does. You will see direct correlation between a country's inflation and interest rates. High interest rates means less number of people taking loans. From a bank's perspective it's not really profitable. Interesting that you would randomly throw Japan's name without reading about their economic situation. The country has been suffering from deflation for a couple of decades now. So inflation is seen as a welcome change there. There is lot the UK could learn from Japan on how to run a free market economy. But inflation is not it because their situation is different. Normally inflation is driven by overheated economies and excessive consumer spending. We are in different territory with the cost of living crisis being driven by supply side issues. A different approach is needed. BTW the commercial banks have c.£900billion on deposit with the BoE. How much is that costing to UK Govt (ie taxpayers) in interest payments? What happens when the base rate rises? Don’t tell me the banks won’t be creaming in the profits (for doing absolutely nothing)." Either way, when the supply doesn't match the demand, banks always try to reduce demand by raising interest rates until the supply issue is resolved. It's a thing all the countries do. Alleging that "they are filling the pockets of their mates" is unreasonable. Can you explain what "different approach" you are talking about and how it will solve the issue? Interests aren't paid through taxes. They are paid from banks through the money they make from investments and loans. The banks obviously make profits with or without interest rates and inflation. But increasing interest rates does not put more money in the bank's pockets nor does it mean tax money is needed to pay the interests. | |||
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"The BoE are looking after their banker mates. Higher interest rates will lead to record profits for the banking sector as debt becomes more expensive. However, it will ultimately impact on businesses who will not be able to afford to invest (or even survive their own energy price increases). Once again we are being screwed by the banking system! Check out Japan’s approach. No interest rate charges there! Raising interest rates during inflation is something that almost every country does. You will see direct correlation between a country's inflation and interest rates. High interest rates means less number of people taking loans. From a bank's perspective it's not really profitable. Interesting that you would randomly throw Japan's name without reading about their economic situation. The country has been suffering from deflation for a couple of decades now. So inflation is seen as a welcome change there. There is lot the UK could learn from Japan on how to run a free market economy. But inflation is not it because their situation is different. Normally inflation is driven by overheated economies and excessive consumer spending. We are in different territory with the cost of living crisis being driven by supply side issues. A different approach is needed. BTW the commercial banks have c.£900billion on deposit with the BoE. How much is that costing to UK Govt (ie taxpayers) in interest payments? What happens when the base rate rises? Don’t tell me the banks won’t be creaming in the profits (for doing absolutely nothing). Either way, when the supply doesn't match the demand, banks always try to reduce demand by raising interest rates until the supply issue is resolved. It's a thing all the countries do. Alleging that "they are filling the pockets of their mates" is unreasonable. Can you explain what "different approach" you are talking about and how it will solve the issue? Interests aren't paid through taxes. They are paid from banks through the money they make from investments and loans. The banks obviously make profits with or without interest rates and inflation. But increasing interest rates does not put more money in the bank's pockets nor does it mean tax money is needed to pay the interests." That last part is not true. The money on deposit at the BoE is earning interest. If you increase base rate you increase the amount the banks will earn in interest in their deposit. | |||
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"The BoE are looking after their banker mates. Higher interest rates will lead to record profits for the banking sector as debt becomes more expensive. However, it will ultimately impact on businesses who will not be able to afford to invest (or even survive their own energy price increases). Once again we are being screwed by the banking system! Check out Japan’s approach. No interest rate charges there! Raising interest rates during inflation is something that almost every country does. You will see direct correlation between a country's inflation and interest rates. High interest rates means less number of people taking loans. From a bank's perspective it's not really profitable. Interesting that you would randomly throw Japan's name without reading about their economic situation. The country has been suffering from deflation for a couple of decades now. So inflation is seen as a welcome change there. There is lot the UK could learn from Japan on how to run a free market economy. But inflation is not it because their situation is different. Normally inflation is driven by overheated economies and excessive consumer spending. We are in different territory with the cost of living crisis being driven by supply side issues. A different approach is needed. BTW the commercial banks have c.£900billion on deposit with the BoE. How much is that costing to UK Govt (ie taxpayers) in interest payments? What happens when the base rate rises? Don’t tell me the banks won’t be creaming in the profits (for doing absolutely nothing). Either way, when the supply doesn't match the demand, banks always try to reduce demand by raising interest rates until the supply issue is resolved. It's a thing all the countries do. Alleging that "they are filling the pockets of their mates" is unreasonable. Can you explain what "different approach" you are talking about and how it will solve the issue? Interests aren't paid through taxes. They are paid from banks through the money they make from investments and loans. The banks obviously make profits with or without interest rates and inflation. But increasing interest rates does not put more money in the bank's pockets nor does it mean tax money is needed to pay the interests. That last part is not true. The money on deposit at the BoE is earning interest. If you increase base rate you increase the amount the banks will earn in interest in their deposit." can you link/Google term me up to the info on commercial banks using the BoE. Can't see why they would the BoE would offer this service. | |||
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"The BoE are looking after their banker mates. Higher interest rates will lead to record profits for the banking sector as debt becomes more expensive. However, it will ultimately impact on businesses who will not be able to afford to invest (or even survive their own energy price increases). Once again we are being screwed by the banking system! Check out Japan’s approach. No interest rate charges there! Raising interest rates during inflation is something that almost every country does. You will see direct correlation between a country's inflation and interest rates. High interest rates means less number of people taking loans. From a bank's perspective it's not really profitable. Interesting that you would randomly throw Japan's name without reading about their economic situation. The country has been suffering from deflation for a couple of decades now. So inflation is seen as a welcome change there. There is lot the UK could learn from Japan on how to run a free market economy. But inflation is not it because their situation is different. Normally inflation is driven by overheated economies and excessive consumer spending. We are in different territory with the cost of living crisis being driven by supply side issues. A different approach is needed. BTW the commercial banks have c.£900billion on deposit with the BoE. How much is that costing to UK Govt (ie taxpayers) in interest payments? What happens when the base rate rises? Don’t tell me the banks won’t be creaming in the profits (for doing absolutely nothing). Either way, when the supply doesn't match the demand, banks always try to reduce demand by raising interest rates until the supply issue is resolved. It's a thing all the countries do. Alleging that "they are filling the pockets of their mates" is unreasonable. Can you explain what "different approach" you are talking about and how it will solve the issue? Interests aren't paid through taxes. They are paid from banks through the money they make from investments and loans. The banks obviously make profits with or without interest rates and inflation. But increasing interest rates does not put more money in the bank's pockets nor does it mean tax money is needed to pay the interests. That last part is not true. The money on deposit at the BoE is earning interest. If you increase base rate you increase the amount the banks will earn in interest in their deposit.can you link/Google term me up to the info on commercial banks using the BoE. Can't see why they would the BoE would offer this service. " https://www.bankofengland.co.uk/monetary-policy/the-interest-rate-bank-rate “Bank Rate determines the interest rate we pay to commercial banks that hold money with us. It influences the rates those banks charge people to borrow money or pay on their savings.” | |||
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"The BoE are looking after their banker mates. Higher interest rates will lead to record profits for the banking sector as debt becomes more expensive. However, it will ultimately impact on businesses who will not be able to afford to invest (or even survive their own energy price increases). Once again we are being screwed by the banking system! Check out Japan’s approach. No interest rate charges there! Raising interest rates during inflation is something that almost every country does. You will see direct correlation between a country's inflation and interest rates. High interest rates means less number of people taking loans. From a bank's perspective it's not really profitable. Interesting that you would randomly throw Japan's name without reading about their economic situation. The country has been suffering from deflation for a couple of decades now. So inflation is seen as a welcome change there. There is lot the UK could learn from Japan on how to run a free market economy. But inflation is not it because their situation is different. Normally inflation is driven by overheated economies and excessive consumer spending. We are in different territory with the cost of living crisis being driven by supply side issues. A different approach is needed. BTW the commercial banks have c.£900billion on deposit with the BoE. How much is that costing to UK Govt (ie taxpayers) in interest payments? What happens when the base rate rises? Don’t tell me the banks won’t be creaming in the profits (for doing absolutely nothing). Either way, when the supply doesn't match the demand, banks always try to reduce demand by raising interest rates until the supply issue is resolved. It's a thing all the countries do. Alleging that "they are filling the pockets of their mates" is unreasonable. Can you explain what "different approach" you are talking about and how it will solve the issue? Interests aren't paid through taxes. They are paid from banks through the money they make from investments and loans. The banks obviously make profits with or without interest rates and inflation. But increasing interest rates does not put more money in the bank's pockets nor does it mean tax money is needed to pay the interests. That last part is not true. The money on deposit at the BoE is earning interest. If you increase base rate you increase the amount the banks will earn in interest in their deposit.can you link/Google term me up to the info on commercial banks using the BoE. Can't see why they would the BoE would offer this service. https://www.bankofengland.co.uk/monetary-policy/the-interest-rate-bank-rate “Bank Rate determines the interest rate we pay to commercial banks that hold money with us. It influences the rates those banks charge people to borrow money or pay on their savings.”" interesting, thanks.  | |||
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"The BoE are looking after their banker mates. Higher interest rates will lead to record profits for the banking sector as debt becomes more expensive. However, it will ultimately impact on businesses who will not be able to afford to invest (or even survive their own energy price increases). Once again we are being screwed by the banking system! Check out Japan’s approach. No interest rate charges there! Raising interest rates during inflation is something that almost every country does. You will see direct correlation between a country's inflation and interest rates. High interest rates means less number of people taking loans. From a bank's perspective it's not really profitable. Interesting that you would randomly throw Japan's name without reading about their economic situation. The country has been suffering from deflation for a couple of decades now. So inflation is seen as a welcome change there. There is lot the UK could learn from Japan on how to run a free market economy. But inflation is not it because their situation is different. Normally inflation is driven by overheated economies and excessive consumer spending. We are in different territory with the cost of living crisis being driven by supply side issues. A different approach is needed. BTW the commercial banks have c.£900billion on deposit with the BoE. How much is that costing to UK Govt (ie taxpayers) in interest payments? What happens when the base rate rises? Don’t tell me the banks won’t be creaming in the profits (for doing absolutely nothing). Either way, when the supply doesn't match the demand, banks always try to reduce demand by raising interest rates until the supply issue is resolved. It's a thing all the countries do. Alleging that "they are filling the pockets of their mates" is unreasonable. Can you explain what "different approach" you are talking about and how it will solve the issue? Interests aren't paid through taxes. They are paid from banks through the money they make from investments and loans. The banks obviously make profits with or without interest rates and inflation. But increasing interest rates does not put more money in the bank's pockets nor does it mean tax money is needed to pay the interests. That last part is not true. The money on deposit at the BoE is earning interest. If you increase base rate you increase the amount the banks will earn in interest in their deposit." I did not say that banks will not earn more interest. BoE will pay them interest. But it doesn't come from tax money: https://www.bankofengland.co.uk/knowledgebank/who-pays-for-the-bank-of-england | |||
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"The BoE are looking after their banker mates. Higher interest rates will lead to record profits for the banking sector as debt becomes more expensive. However, it will ultimately impact on businesses who will not be able to afford to invest (or even survive their own energy price increases). Once again we are being screwed by the banking system! Check out Japan’s approach. No interest rate charges there! Raising interest rates during inflation is something that almost every country does. You will see direct correlation between a country's inflation and interest rates. High interest rates means less number of people taking loans. From a bank's perspective it's not really profitable. Interesting that you would randomly throw Japan's name without reading about their economic situation. The country has been suffering from deflation for a couple of decades now. So inflation is seen as a welcome change there. There is lot the UK could learn from Japan on how to run a free market economy. But inflation is not it because their situation is different. Normally inflation is driven by overheated economies and excessive consumer spending. We are in different territory with the cost of living crisis being driven by supply side issues. A different approach is needed. BTW the commercial banks have c.£900billion on deposit with the BoE. How much is that costing to UK Govt (ie taxpayers) in interest payments? What happens when the base rate rises? Don’t tell me the banks won’t be creaming in the profits (for doing absolutely nothing). Either way, when the supply doesn't match the demand, banks always try to reduce demand by raising interest rates until the supply issue is resolved. It's a thing all the countries do. Alleging that "they are filling the pockets of their mates" is unreasonable. Can you explain what "different approach" you are talking about and how it will solve the issue? Interests aren't paid through taxes. They are paid from banks through the money they make from investments and loans. The banks obviously make profits with or without interest rates and inflation. But increasing interest rates does not put more money in the bank's pockets nor does it mean tax money is needed to pay the interests. That last part is not true. The money on deposit at the BoE is earning interest. If you increase base rate you increase the amount the banks will earn in interest in their deposit. I did not say that banks will not earn more interest. BoE will pay them interest. But it doesn't come from tax money: https://www.bankofengland.co.uk/knowledgebank/who-pays-for-the-bank-of-england" Then read this... https://www.ft.com/content/24f51ce8-1a61-4e03-95d3-e87f2c9d938b | |||
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" So interest rates have to be increased to reduce the money in circulation. Pretty sure the gas bills will be doing that, and with much less lag than interest rates No. When you pay money to buy something, the money is still in circulation. It's not though is it, once it's in the hands of BP shareholders it won't be recycled around the economy like a retail purchase would Even if shareholders make profits, they don't keep them in banks. They usually invest the money somewhere. The money is still in circulation." They invest it in assets, stocks and shares, property etc... So it fuels asset inflation, but not price of everyday goods. | |||
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"The BoE are looking after their banker mates. Higher interest rates will lead to record profits for the banking sector as debt becomes more expensive. However, it will ultimately impact on businesses who will not be able to afford to invest (or even survive their own energy price increases). Once again we are being screwed by the banking system! Check out Japan’s approach. No interest rate charges there! Raising interest rates during inflation is something that almost every country does. You will see direct correlation between a country's inflation and interest rates. High interest rates means less number of people taking loans. From a bank's perspective it's not really profitable. Interesting that you would randomly throw Japan's name without reading about their economic situation. The country has been suffering from deflation for a couple of decades now. So inflation is seen as a welcome change there. There is lot the UK could learn from Japan on how to run a free market economy. But inflation is not it because their situation is different. Normally inflation is driven by overheated economies and excessive consumer spending. We are in different territory with the cost of living crisis being driven by supply side issues. A different approach is needed. BTW the commercial banks have c.£900billion on deposit with the BoE. How much is that costing to UK Govt (ie taxpayers) in interest payments? What happens when the base rate rises? Don’t tell me the banks won’t be creaming in the profits (for doing absolutely nothing). Either way, when the supply doesn't match the demand, banks always try to reduce demand by raising interest rates until the supply issue is resolved. It's a thing all the countries do. Alleging that "they are filling the pockets of their mates" is unreasonable. Can you explain what "different approach" you are talking about and how it will solve the issue? Interests aren't paid through taxes. They are paid from banks through the money they make from investments and loans. The banks obviously make profits with or without interest rates and inflation. But increasing interest rates does not put more money in the bank's pockets nor does it mean tax money is needed to pay the interests. That last part is not true. The money on deposit at the BoE is earning interest. If you increase base rate you increase the amount the banks will earn in interest in their deposit. I did not say that banks will not earn more interest. BoE will pay them interest. But it doesn't come from tax money: https://www.bankofengland.co.uk/knowledgebank/who-pays-for-the-bank-of-england Then read this... https://www.ft.com/content/24f51ce8-1a61-4e03-95d3-e87f2c9d938b" That's just a prediction made by a left wing "think tank" Doesn't have to be true. | |||
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