Petem95

Telegraph | Comment | It's Brown's fault we have to tighten belts

Seems Labours illusion of the "good times" are well and truely over and we'll all be paying the price for a long time to come for GB's mismanagement.

Anyone's guess where interest rates will peak now it seems, with an increasing number of articles suggesting the next rise could be as early as next month. I'd put my money on the next rise being March.

Iwan

Well we'll see soon enough. It does surprise me that so many people just can't see it coming, especially some of the folks on here who appear to be quite well clued in on economics.

Look at the headline on the (totally unbiased towards Labour) BBC website the other day, "Shock as BoE puts up interest rates". Sorry, who exactly was that a shock to? Certainly not to me, and probably not to many other people with a modicum of common sense. This has been on the cards for a long time.

By the way, it hasn't been on the news yet but my company has just announced another round of redundancies - a fairly large number too. I'm almost certain to be affected, having clung on for each of the last 4 annual headcount slashing orgies - with the jobs (hi-tech) going to China. I'm not arguing the economics of this btw, I'd probably do the same if I was a high level manager or corporate bean counter.

I'm not gloating by the way, I'd much rather the country/economy wasn't heading for disaster. I'm getting out this year, I wish I didn't have to.

Leslie

It is hardly surprising since he has been overborrowing from the IMF such that they warned him about it and people here have been encouraged to rack up huge debts on their credit cards so that it all looked good but built on a house of cards. Heaven help us if it goes into complete collapse.

Les

Petem95

If that worst-case scenario did happen then it would be very bad as the UK economy would probably never fully recover due to the emergance of China, India, Russia etc as key global players. Maybe our living standards (and economy) will fall while theirs rise.

Yeah its sad. I'll be heading for the exit within 4years as I dont see this country having a very positive future. No way would I want to bring up kids here. Just makes me mad knowing that things could be so different

Flaps

iTrader: (1)

Our mortgage went up to over £700 the time before last when the interest rates rose. We won't be able to afford the house soon at this rate!

dpb

Ill be waiting to pick up the peices left when the **** hits the fan .

How many people *really* believed it was all sustainable..?

mart360

Its amazing, the so called experts, and people in the know who seem amazingly to have forgotten some surprising statistics and monetary trends...

from right back in the 60,s and possibly before, the housing ,market has always been cyclic, with rises and falls in the market... the rises inevitably being higher and higher.... the last trough was in the eighty's, so its about time we had another....but without fail, it will rise again and be higher than before...

How may people got caught in the eighty's , with houses bought for 100K + only to find them worth about 40K following the crash....... the ones who stuck with it, have gone on to sell those property's for 200K ....

yes it will happen, and the hand wringers will blame GB, yes he may be responsible, for some of the problem, but he wont be the last thats for sure!!

Mart

kingofturds

iTrader: (1)

Can see us becoming a second rate country (more so) if we fall into recession

unclebuck

Just as Blair jumps ship. Who would have thought it?


I'll lay bets you won't find a hint of any of this in the BBC news.

AudiLover

I dont care, bring on the rise

alcazar

iTrader: (2)

There's always one, isn't there, one who is happy to make money off others' misfortune, however misguided the "others" were, or to laugh at their plight, whilst sitting pretty?

Are you one of "Thatcher's children" by any chance?

Or just a troll?

GB has seen this coming for a while now. Why else has he been getting increasingly anxious to take over as PM just before his "economy built on sand" collapses?

Then, with true NL spin, the Scotch b*stard pension-thief can blame it on his successor

Alcazar

AudiLover

I get what your saying, but in this world the majority of wealthy people out there all made their riches due to taking advantage of others, or through others misfortune.

alcazar

iTrader: (2)

"Taking advantage", well, maybe.

"Others' misfortune".......not for me thanks.

Alcazar

Deep Singh

I'm not sure how the guys here think they will take advantage of the recession/economic slowdown. The only way is if you are in a recession proof but well paid job, and have a big wad sitting in a bank account. There are people like that on scoobynet, but not many.

hades

Once the "house of cards" based on borrowing (both national and personal debt) starts to realy come down, interest rates can't keep increasing. Simple terms unemployment and inflation are approximately inversely proportional in normal economic cycles - one goes up a lot, the other comes down. Once we start going into recession, unemployment, repossed houses etc will wipe out consumer demand, spending and inflation will fall, interest rates will have to fall to try and bring the country back out of the recession and into recovery. Most people will lose out during a recession, but most people have been benefitting from the false "healthy economy" propped up by borrowing, and will benefit from an eventually recovery, so it kind of evens out - unless you've over-stretched yourself during the "good times".

The BoE will be well aware that it is treading a fairly fine line between controlling inflation and not forcing a big crashing recession, and so don't expect to see interest rates go through the roof overnight. Increase a bit more (maybe by another 2% or so in the next year or two), but I can't see it going really high (i.e. double figures) as the consequences would be disasterous for so many of the country.

ADILM

exactly the same with me!

J4CKO

iTrader: (1)

I am lucky in not being directly subject to the interest rate rises, i.e. not saddled with a mortgage or any other debt, I sypathise with those who are, have been there before !

So, for myself, will I end up worse off as well by indirect means, i.e. I want some building work done, will the builders hike their prices to pay their bills or will the stays the same or get cheaper as less people can afford work to be done so the market gets more competitive, will prices rises as business pay higher loan rates ?

106rallye

Unfortunately this is uglier side of capitalism. It would be very hard to not do that. It happens in most peoples day to day life, without even realising. If for example someone has a normal pension fund, unless it is one with a portfolio that only includes 'ethical' companies then who knows who has suffered to increase your future pay out. Chances are if one person or company has made money someone else has missed out. If we are looking at companies then there could be redunancies bankrupcy etc.

Making money out of property is not guaranteed (no matter what this country seems to believe) otherwise everyone would be doing it. Same with the stock market and any other investment otherwise everyone would be doing it correctly and everyone would be making a fortune. IMHO if people looked at their finances and built in a contingency whilst using a house as somewhere to live as supposed to a way to 'double their money' then we wouldn't be in this mess.

For what its worth IMHO I feel that the people who were misguided are in the minority. A lot of people have not borrowed (or lent) responsibly. Not many people HAVE to get into debt, its just the buy now pay never culture that seems to have developed in the UK

Andy

john banks

Deep, even if someone has money in the bank and keeps their job at decent pay, if high inflation sees the consumer and the government out of debt then the money would also be devalued. Some would argue, and I am tending to agree, that it is the money supply that is feeding house price inflation. Oddly property could be a hedge against inflation, although the risk of it collapsing would not make me favour it. I'm thinking offshore or gold at this point.

turboman786

WOO HOO!! Cheap X5s and Cayennes for all!!

Deep Singh

John I agree. I was just trying to make the point that there are only a very small minority that MAY benefit from such circumstances, in reality its probably no one.

I'm not sure how you think offshore is a hedge against inflation, unless you mean holding it in another currency ie Swiss Francs? Thats too complicated for me.

Gold is always played as a hedge against inflation but comes with lots of problems. There were decades where gold sat at $250ish, its now a ?year into a bull run, it produces no income/return, actually costs you to store/insure it etc. So to put more than say 10% of your portfolio into gold would be brave to say the least.

All imho!

john banks

It is tricky, I also agree. I feel it is a shame that I have no confidence in the economic stability of my own country so that I do not want to increase investments here. Offshore, I mean exposure to other markets that might have a bull run whilst the UK/US go bust. With globalisation this may be difficult, but I do suspect that China would do well, and as mentioned, Japan has been so disappointing for so long it seems more likely to grow than the UK/US in the medium term from the point where we are sitting now? I don't know enough yet about international markets, but I am deeply contrarian and don't want to simply follow trends in what I feel are bubble markets.

Gold is indeed volatile, but I think we'll wait to re-enter the UK housing market until it eventually corrects. My hope would be that the gold valuation in sterling by the time that correction has happened and all the economic disaster that would follow would roughly coincide. If we have inflation then it will to some degree protect, if we have a housing market crash with little inflation then it won't matter that much if gold stays flat.

Over the last few years I've been happy to hold about 20% in UK stocks, 50% in primary residence and 30% in personal business holdings. Now I've sold the house I have about 50% of my net worth sitting in cash in internet savings accounts. They sure take some setting up and managing to get the best rates consistently. The money laundering stuff is quite obstructive to opening accounts these days, especially if you've changed address and have little proof of it yet.

One option is to move funds into my business to reduce business debt, most of which is at base rate + 1 %, but with tax relief on these debts they are fairly cheap loans at present, but not really at much lower rates than you can get an after tax return on savings.

What I'm getting at is that since I'm feeling pretty bearish at present, it is difficult to know where to invest. Only 10% in gold would give little hedge against inflation really, but a majority of it in gold could go the wrong way.

Since I've lived frugally through an easy credit environment and saved, I now need to try to preserve what I've made sacrifices for from the inflation or recession bogey men... it is just how. Seeing trouble ahead is one thing, sheltering yourself from it is another?

Deep Singh

Again I agree on most. I have about 70% in property and the rest split between shares and cash, maybe about 2% in gold. If you shop around with accounts you should always be able to beat inflation ( at its current level) so there is your inflation protection as far as I can see.

I'm not to sure about the increased exposure to BRIC, those markets are not transparent/well regulated for amateur investors like me(and ?maybe you). They are also subject to currency fluctuations. I put some money into an investment in India that has made me a 15% return, the rupee has lost that much in the same time so I've made sweet fa though I risked my capital!

Germany starts to look interesting but then Merkel does something like increasing vat (as she has just done) that then worries me. However it could well be the one Euro country that grows in the recession. Its an industrial monster and its population has not adopted the credit culture, they have the largest savings per capita in Europe.

I do believe cash is king though. As long as I can beat inflation thats where I'm going to expand my portfolio with a view of perhaps taking advantage of the next equities/property cycle. ( Though I'm not actually hoping for a recession!)

john banks

Agree about regulation of other markets, I am also a fairly new investor.

My concern is that the real inflation level is rather higher than RPI/CPI suggest. Growth in M4 money supply 14% pa seems to be higher than growth plus official inflation for example, although my understanding is increasing on this subject.

DEEDEE

Not affected paid Mortgage up 1 month ago, so a rise in intrest rates actually help me with my savings.

john banks

Do you really gain though if the rise in interest rates is simply reflecting an increase in inflation?

Deep Singh

Interesting. During the last 'recession' when interest rates were 13% what was the rate of inflation? ie if you had £1000 in the best account was it increasing or decreasing in value?

john banks

There "should" be a few % between them which is how you get your real return, but after tax when rates are high it is easy to deflate your savings. Even then, do you believe the change in money supply is the real rate of inflation (eg 14%) or RPI at 3.9, or to my mind completely discredited CPI at 2.7 (probably 3.1% next week?)

hades

If you ever get to the state where interest rates are below inflation, it would make sense for people to borrow ever more, and no one will save anything if they know their savings are going to decrease in real terms. Hence, it'd be a very bad thing if interest rates got below the rate of inflation, and encourage everyone to gt into lots of unsustainable debt . . . . sound familiar? The question is whether with the rather dodgy "politically adjusted price index" inflation calculations going on at the moment we've almost made it into that undesirable situation already.

Smiler

Don't blame someone else if you overstretched yourself borrowing money