Thursday, February 07, 2008

The pound in your pocket - again !

Ok this is the 3rd post I wasn't going to write today. But the madness of our rulers waits for no man.

The Bank of England admits that Inflation is out of control ( aka will rise ) and reduces interest rates at the same time. This is effect destroying the savings of those people who haven't been supporting Gordon's great debt fuel campaign to make himself prime minister and cling to power as long as he can.

Lets not pretend any more that the BoE is independent shall we. I'm guessing that Labour are going to go for a snap election soon before the really dire news sets in.

Its a bloody disgrace. But as we know the Labour party is shameless and especially its leader.

2 comments:

Vindico said...

Yes, it is an odd situation. Cutting interest rates will hurt those with modest cash savings, an benefit those with assets (e.g. large shareholders, etc).

The problem is that the only way out of the present 'crisis' is more spending and more borrowing; i.e. an increase in the money supply. If people started to repay their debts the current money supply would dwindle as money was 'un-created', leading to companies fighting over the now more valuable Pounds, leaving some companies to go bust etc.

It is a right royal cock up.

lettersfromatory said...

The problem is that the BOE just has to hit a single CPI inflation target that it was below RPI. As CPI is about 2% at the moment, they can afford to cut interest rates, even though RPI is threatening to run riot.

Just goes to show how a single target for the entire British economy is such a clumsy and inappropriate tool.