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Worst of recession may be over, but then again maybe not...

The newest member of the Bank of England’s Monetary Policy Committee, which meets once a month to decide what to do with interest rates, claims that the worst may be over for Britain’s economic recession. Confusingly, however, he says that his comments should not be taken as a prediction and gives little evidence to back up his claim. David Miles, a former senior economist at Morgan Stanley will replace David Blanchflower on the MPC in a month’s time. In a press interview, Miles said “Economic history teaches us that a combination of tax cuts, running large fiscal deficits, substantial cuts in interest rates and more quantitative easing is likely, with a certain time lag, to have a substantial...

posted on: Apr 18, 2009 | author: Lance

Basic guide to Quantitative Easing

This is an article that I could have written a few months ago, when the Bank of England stated its intention to begin ‘queasing’. But it has become rather more relevant now that one of the pronouncements of the G20 summit is that the International Monetary Fund (IMF) will itself begin to ‘print’ additional SDRs (Special Drawing Rights, effectively the IMF’s own currency) which its contributor countries can draw down in the shape of dollars, euros, etc. Note my use of the word ‘print’ in the above paragraph. The days when first world countries used the printing press to increase the volume of money in circulation have long gone, assigned to eras such as Weimar Germany. Paper and...

posted on: Apr 4, 2009 | author: Alex

Where to put your savings in today’s low interest rate economy...

I’ve been waiting to finish this article until the UK’s inflation figures were released. They show the CPI figure for November to be 4.1%, higher than predicted by the majority of economists. This figure is more than double the 2% target that the Bank of England’s Monetary Policy Committee is supposed to aim for, yet the UK’s interest rates are falling rather than rising. (Incidentally, a fall in the rate of inflation doesn’t necessarily mean that prices are falling. That is one possible interpretation, but alternatively it could mean that prices are continuing to rise, just not as quickly as before. Newspaper articles rarely make this distinction, unfortunately.) Of course, the MPC would say that it is targeting...

posted on: Dec 17, 2008 | author: Alex

Deflation or inflation – what will happen in the UK?...

I’ve written in a previous article about the various concepts involved in economic inflation and how it can affect the value of your money, your wages and the things you buy. The opposite of inflation is deflation, which I’ll explain in this article before going on to discuss the probable and possible situations in the UK for the next few years. The ‘deflation versus inflation’ argument is more important in the UK today than it has been at any time in the last 30 years, so it’s worth thinking about in some depth. So, deflation. If inflation is a general increase in prices and/or wages driven by the greater availability of money (whether ‘real’ money or debt), then...

posted on: Dec 6, 2008 | author: Lance

Interest rates slashed – your savings are now as worthless as your house...

Should we be surprised that the Bank of England took desperate action today, cutting interest rates by an astounding 1.5 percent down to 3 percent, the lowest level in over half a century? OK, so it’s a massive cut and far more than the 1% which even the most dovish of market watchers were calling for, but ultimately this trainwreck of an economy is now in completely uncharted waters so why not go completely over the top? What else is left to lose? Despite strong evidence to the contrary, almost everybody seems to believe that massive interest rate cuts are a magic bullet that will re-inflate the property bubble, loosen up credit markets, get the public borrowing and...

posted on: Nov 7, 2008 | author: Lance

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