So, the latest cut (just announced today). Does this mean that the UK really was right all that time ago when it decided not to join the monetary union? What would be happening to our economy right now if we were part of it?
It all seems pretty important stuff but I can never understand quite what it all means!
They are trying to stimulate growth through by penalising banks for holding money on deposit with the ECB.
Basically trying to force them to loan money to companies to get a return and also devaluing the Euro to make exports more attractive.
@john in the past our interest rates were cut more aggressively than the euro rates as we where in bigger trouble than was the EU as a whole (although huge differences eg Germany vs Spain and Italy) ! Euro growth has stalled somewhat so they are cutting their rates further now whilst we are talking of a rate rise.
So in order to stimulate growth to get the eurozone out of the depression caused by the crash which was caused by the banks lending money on unsustainable and high risk cheap credit and selling bad debt parcelled as good they're forcing the banks to make higher risk investments by lending cheap credit to companies with no market for their products that'll end up as bad debt that the banks will eventually have to parcel up and sell on as derivitives.
Make sense?
THM to the forum please.
Interest rates as a means of following economic policy are a blunt instrument at the best of times, as seen in the UK (N vs S divide/debate). To extend that across an area the size of Europe seems ah naive (but I'm not an economist).
Which is why - aside form other reasons - I'm not sure about the SNP pursuing monetary union as a 'solution' for an ind. Scotland... - surely that ties you back to the SE led rUK you're trying to escape from?
So what would have that done to our economy had we been in it? IE, would we have been in the state we were in 5 years ago if we were in the union? Would the continued slide in EU growth (with us a member of the monetary union) led to a fate similar to Greece? Or would it have protected us?
It all seems pretty important stuff but I can never understand quite what it all means!
I always find it puzzling that economic policy news gets such a high priority in the media. No one understands it (although some they think they do), and the impact of a minuscule change in interest rates/growth/inflation/currency valuations etc is negligible on people's every day lives. The only people who should be interested are those who have a direct professional interest in it but the rest of us are subjected to a daily stream of figures which are largely meaningless to anyone who doesn't have an economics degree.
I always find it puzzling that economic policy news gets such a high priority in the media. No one understands it (although some they think they do), .
Economic policy is as much about managing expectations by making public statements as anything else.
So a big news headline saying interest rates are dropping will encourage people to spend as it means credit is cheaper and saving is less worthwhile.
Just dropping the rate but not mentioning it to the general public very loudly would not lead to the required change in behaviour...
The recession has had a bit of an impact on a few of us - economic policy data/decisions like these give us an insight into how we're (as part of the European economy) recovering/not recovering from it, and how rich/not rich we're likely to be in the next few years.
Basically the story should be headlined: "Europe still in the shit".
Whether or not it's being explained well enough is another matter.
Had the UK been in the euro we'd have been bailing out the broken southern european ecomomies as well, and soon joining them...
As for the rate cut, it's panicked desperation. The eurozone is sliding back into the recession it had barely clawed it's way back out of, and now the next ripples of the Crash of '08 are in train to hit us. No it wasn't 'solved', it can never be 'solved'; far from being over and done it has only just begun...
far from being over and done it has only just begun...
I'm 40 and for most of my life we've had rising living standards and relatively constant economic growth. Since the mid-80's most of this has (it's now appears) come off the back of increased supply of credit.
I would expect the remainder of my life to be flat at best, probably just bimbling along as we are now with v little growth or at least moving from low growth to slight recession - which to a lot of people will feel like worsening circumstances because they're not getting ever-richer. Not so much a lost decade as a lost generation
Its all pretty pointless if you're going to continue with the whole ridiculous concept of setting economic policy to suit both Germany, and complete basket cases economies like Greece, and expecting things to improve.
The whole experiment in lunacy is going to continue because those in power in Brussels can't bear to state what everyone knows. That its been a disaster, is still an ongoing disaster, and it'll drag the whole continent down unless its fundamentally reformed. Which they continue to demonstrate that they won't even countenance. So it looks like we're all ****ed! The next Euro Crisis will be along any time now.....
*awaits telling off from Junkyard*
UK wouldn't have had the 30% near instant devaluation either, in the race to the bottom of the major western currencies.
while the entire west runs as a global ponzi scheme, there will be no solution.
and pre-2008 (ish) crash, UK mortgage rates would possibly have been even lower than they were.
mine was 3.9% fixed for far longer than any fixed term available in UK, when typical UK mortgage rates were about 6%.
which to a lot of people will feel like worsening circumstances because they're not getting ever-richer
Well, I don't know if it's that basic. It makes investment rather difficult doens't it? That would make it harder to create jobs, and when the population goes up they're going to need more work to do.
Basically the story should be headlined: "Europe still in the shit".
+1
Basically, the creation of a Drach-Mark - bolting together the front half of a ferrari and the back end of a nag fit only for the glue factory has strangely not lead to ferrari like speeds from the rear end.
And the wheels are looking wonkier and wonkier as time goes on.
Some nice analogies in here.
I fear broess' prediction will be correct due to the points made by binners