Why the interest rate cut will fail

The panic measure to drop interest rates by 1.5% will spread - well panic.

Those who get some money off the mortgages will save rather than spend - and they wonder how the economic disaster Gordon Brown has created will play out.

The group who were okay, who had savings, are now to lose much of their money as interest rates drop well below inflation. They'll be cutting back too.

Don't expect the consumer market to pick up - the government (for it is really they who are behind the Bank of England move) has shot us in both feet and is now extolling us to dance.

Next up - the general election bribe of tax cuts for votes funded by borrowing ! ( Or so radio 4 was telling me as it had its next fix of Vince Cable this morning - he should ask for a presenters salary ).

Not only are we in deep trouble now - but we now know our future is being destroyed by the self serving, self interested Labour party and its vanity ( or perhaps socialist spite determined to destroy our wealth to enslave us with a socialist state ).

Only the Conservative party or the IMF can sort this mess out.

How is the Bank of England official interest rate meant to work ?

As the political row gets going about changes in interest rates getting passed onto borrowers (or not ), I realise that I don't fully understand the mechanism by which this all works.

The Bank of England web site says:

The Bank of England sets an interest rate at which it lends to financial institutions. This interest rate then affects the whole range of interest rates set by commercial banks, building societies and other institutions for their own savers and borrowers. It also tends to affect the price of financial assets, such as bonds and shares, and the exchange rate, which affect consumer and business demand in a variety of ways. Lowering or raising interest rates affects spending in the economy.

But 'how much' does the Bank of England lend and on what terms ? What are the limits and where does the money come from ?

I seem to remember something about Banks having to make deposits with the Bank of England etc - but its been a long time since 'O' level Economics and I'm a bit rusty here. Anyone know a good site to explain all this ?

Update: I have yet to find on the net any proper explanation of all this or to hear one. ( Robert Peston of the BBC comes closest ).

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.