Raising the interest rate will narrow the gap between bank rate and Libor, provide anti-inflationary pressure, sustain the pound , encourage saving and show up Brown's economic and financial policies for the unaffordable debt and mispriced risk they consist in.
Lowering the interest rate will diminish the central bank's credibility as banks do not respond with an alteration in their assessment of risk and continue to lend at rates even more widely detatched from bank rate, encourage inflation, cause a flight from sterling, reward reckless lending and borrowing, and sustain Brown's discreditable economic and financial regime.
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hawk that I am, lowering rates a little is the most sensible way forward at this time.
Long ago I thought rates would hit 6% and stay there for a while, mainly due to high commodity prices.
The credit crunch has changed everything. For every month we stay with high rates we encourage a fall in borrowing and investment. If these fall of a cliff next year we have a horrible recession.
To soften the blow, easy credit a little is the right thing to do. Ease to much and we will have high inflation. But inflation hurts those in credit and benefits those in debt.
With the government and most of the people in debt, a little inflation will be welcome....(and here lies the genie in the bottle too).
Raising rates would be insanity. Small corporates and households will suffer the most; corporates and banks can manage the risk change.
Raising rates would encourage the pound to remain over-valued, to the pain of our economy if not out holidaymakers.
It is a very tricky decision at the moment, but down a little it should be. Remember our rates are already much higher than Europe, USA and Japan.
Inflation destroys virtue City: ease credit 'a little'? that would be on top of 'a lot' that has been leading up to this for the last incompetent, sleazy decade.
The standing of the Bank of England has been grossly attacked by Brown as he tries desperately to protect his regime, the rate fix today is all about propaganda - the message should be that there is a technically competent, straight-dealing, financial and monetary authority in the UK. If rates are cut the message will be that the UK is wholly governed by political, short termism. And unpleasant political at that, inimical to wealth creation in a global economy.
A little easing: there's always a temptation to "have some Madeira, m'dear", until "the pig got up and slowly walked away". But I'm too soft-hearted to do the right thing.
I'm very fond of inflation, S, it's one of my best friends. But not when it threatens living standards and social peace - and it just might if it gets grip.
one nice personal side effect to inflation is that my confidence in an interest only mortgage is further justified.
by the time i come to pay it off it will be a weeks wages at best...
You were right City, they cut the rate.
Ignore Tescos protestations - food prices on the shelf for many staples have risen hugely of late. Fuel prices set to rise massively again next year. There is no doubt inflation is on the way.
However, if it helps to bring this dictatorship crashing down, it is a price worth paying. I'm slack-jawed at the monster this government has become since Brown was not elected. Worse by the day, and the depth of corruption now being uncovered matched only by the government's refusal to observe the rule of law. The Stalin tag Brown was given way back is horribly accurate, and whilst he has not yet started his own purges, I wouldn't put it past him - they would like to see our sceptic island as one super super "Titan" prison (WHO comes up with these names?), staffed with Polish prison officers on the minimum wage.
The rate cut was a craven bowing to the pressure of the big banks. Anyone would think the government was in the hands of business and financiers, but that couldn't be the case here, could it? Could it?
Say you want a revolution?
I don't want a revolution Elby, I want a general election, but we aren't going to get one; there isn't even going to be a bye election in Glasgow Cathcart.
What we are going to get is a couple of new Constitutions; one from the European Union and one drawn up by Jack Straw for local Regime/individual relations (as the UK has opted-out of all civil liberties and rights aspects of the former).
Having a non-functioning, wholly ornamental head of state is contributing to the vulnerability of the people to untramelled Executive power.
Guess what? Various of the big supermarkets fined millions today for fixing the price of milk, butter and cheese.
Their story - they wanted to help the farmers. Who needs Tommy Cooper when you've got Sainsbury's and Asda.
The revolution statement was me thinking John Lennon. It's all a sodding mess though. Came across this quote from Proudhon on some mad Geordie lefty's blog (he came across Abrahams in the 90s and days he was anything BUT "shy and retiring".
Anyway, over to Proudhon.
To be governed (ed)
"... is to be watched, inspected, spied upon, directed, law-driven, numbered, regulated, enrolled, indoctrinated, preached at, controlled, checked, estimated, valued, censured, commanded, by creatures who have neither the right nor the wisdom nor the virtue to do so. To be GOVERNED is to be at every operation, at every transaction noted, registered, counted, taxed, stamped, measured, numbered, assessed, licensed, authorized, admonished, prevented, forbidden, reformed, corrected, punished. It is, under pretext of public utility, and in the name of the general interest, to be placed under contribution, drilled, fleeced, exploited, monopolized, extorted from, squeezed, hoaxed, robbed; then at the slightest resistance, the first word of complaint, to be repressed, fined, vilified, harassed, hunted down, abused, clubbed, disarmed, bound, choked, imprisoned, judged, condemned, shot, deported, sacrificed, sold, betrayed, and to crown all, mocked, ridiculed, derided, outraged, dishonoured. That is government; that is its justice; that is its morality!"
(Proudhon)
This has been a Public Service announcement
Elby, this is a public service announcement indeed. And these days, as good old Proudhon said, "proper tea is theft"...
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