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Bond markets reward UK budget austerity with low interest rates. Lesson for Ireland.


patslatt

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UK interest rates have dropped to the lowest levels in a generation.http://www.cnbc.com/id/39792565 This is probably due to UK government budgetary austerity and,to a lesser extent, fears of a double dip recession brought on by austerity.

If UK interest rates fell mainly due to budgetary austerity,the lesson for the Irish government is clear:follow suit in the Decemer budget by slaying some public spending sacred cows,such as excessive wages and gold plated pensions. Then Ireland's punitive interest rates will fall towards Germany's low rates,which alone would be enough to revive the economy.
 
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Breadan O'Connor

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UK interest rates have dropped to the lowest levels in a generation.News Headlines This is probably due to UK government budgetary austerity and,to a lesser extent, fears of a double dip recession brought on by austerity.

If UK interest rates fell mainly due to budgetary austerity,the lesson for the Irish government is clear:follow suit in the Decemer budget by slaying some public spending cows,such as excessive wages and gold plated pensions. Then Ireland's punitive interest rates will fall towards Germany's low rates,which alone would be enough to revive the economy.

I noticed how UK rates have dropped.

But they also still have their own currency and they are contemplating billions in QE to stimulate the economy.

Ireland has not a penny for stimulus and with the dollar and sterling dropping then I can't see exports rising.
 

ocoonassa

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follow suit in the Decemer budget by slaying some public spending cows,such as excessive wages and gold plated pensions
In principle I would agree with you entirely, save for this [ame=http://www.youtube.com/watch?v=3pwAFohWBL4]YouTube - Six Minutes with the Renegade Economist - Michael Hudson Special...[/ame]

I really don't think that what is described therein should be got away with by those responsible. Clearly our Government is an agency of theirs. I'd rather see a Government that has true elected reps of the people making the tough decisions.
 

Cassandra Syndrome

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Yippee! Lets live like serfs, so that the cost for borrowing for the Statist Neofeudalists drop. Where can I donate 5 pints of my blood for Anglo Irish, my life for the elite....

Yeah the solution to our €1 Trillion debt monkey is to stamp on the face of the domestic economy forever and to borrow to ad infinitum.

The Gilt are at there lowest level because Interest rates are at there lowest levels EVER plus QE.
 

Cael

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UK interest rates have dropped to the lowest levels in a generation.News Headlines This is probably due to UK government budgetary austerity and,to a lesser extent, fears of a double dip recession brought on by austerity.

If UK interest rates fell mainly due to budgetary austerity,the lesson for the Irish government is clear:follow suit in the Decemer budget by slaying some public spending cows,such as excessive wages and gold plated pensions. Then Ireland's punitive interest rates will fall towards Germany's low rates,which alone would be enough to revive the economy.
You talk about countries like they were trained monkeys for the "markets." If we are good were are rewarded, if we are naughty, we are punished. But, I suppose, thats the reality of capitalism.
 

orbit

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But they also still have their own currency and they are contemplating billions in QE to stimulate the economy.
If anything that would cause rates to rise, due to the inflation and currency depreciation risk.

No. The fact is in one fell swoop, the UK has done more than we have arsed around thinking about doing for the last two years now. Time to get the finger out, I think.
 

Cassandra Syndrome

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Latest M4 money supply figures released this week showed an unexpected decrease.
 

Cassandra Syndrome

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If anything that would cause rates to rise, due to the inflation and currency depreciation risk.

No. The fact is in one fell swoop, the UK has done more than we have arsed around thinking about doing for the last two years now. Time to get the finger out, I think.
So why is the 2 year treasury note in the States at a record low? The 10 year bond is flirting with a record low too.
 

HarshBuzz

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HarshBuzz

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So, what has QE by the US to do with UK bond rates?
if you can't extrapolate from;

USA + QE = low bond yields (they're yields by the way, not rates)

and

UK + QE = low bond yields,

there really isn't much helping you here I'm afraid
 

markjbloggs

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You talk about countries like they were trained monkeys for the "markets." If we are good were are rewarded, if we are naughty, we are punished. But, I suppose, thats the reality of capitalism.
Got it in one, Sunshine !
 

orbit

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if you can't extrapolate from;

USA + QE = low bond yields (they're yields by the way, not rates)

and

UK + QE = low bond yields,

there really isn't much helping you here I'm afraid
So, are you suggesting that any country (with its own currency) that engages in QE will be rewarded with low bond yields?
 

HarshBuzz

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So, are you suggesting that any country (with its own currency) that engages in QE will be rewarded with low bond yields?
depends on the form of QE engaged in obviously but in the forms adopted in the UK and the US, it's pretty much a given - and evident in the record low yields out there
 

Cassandra Syndrome

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depends on the form of QE engaged in obviously but in the forms adopted in the UK and the US, it's pretty much a given - and evident in the record low yields out there
QE is the last roll of the dice in Central Banking, after rates hit 0% to 1%. Japan has been at it for 10 years and their yields are all below 1%.
 

Breadan O'Connor

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If anything that would cause rates to rise, due to the inflation and currency depreciation risk.

No. The fact is in one fell swoop, the UK has done more than we have arsed around thinking about doing for the last two years now. Time to get the finger out, I think.

As I understand it the UK govt. buys its own bonds with QE.

This increases the demand for UK bonds and therefore their price rises.

Yield and price move in inverse directions therefore the yield on UK bonds(gilts) goes down.

I'm open to correction on that!
 

HarshBuzz

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As I understand it the UK govt. buys its own bonds with QE.

This increases the demand for UK bonds and therefore their price rises.

Yield and price move in inverse directions therefore the yield on UK bonds(gilts) goes down.

I'm open to correction on that!
you are correct sir

of course you destroy your currency and vastly increase debt at the same time but hey, them's the breaks
 

orbit

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depends on the form of QE engaged in obviously but in the forms adopted in the UK and the US, it's pretty much a given - and evident in the record low yields out there
I see, and it has nothing at all to do with the UK's budget cuts? So, why are they putting themselves to all this fiscal pain then, if QE is all they need to do?

So, "UK + QE = low bond yields" forever more, no matter how much new debt they issue. I don't buy it. Printing money on its own would ultimately lead to inflation and a declining exchange rate.
 
D

Dylan2010

The Americans did something like this in the 1960's known as "Operation Twist" , in the end it failed and interests rates went to where they wanted to go. The US financial economy is $63 trillion , a couple of trillion by the Fed is not a game changer. If printing was a good idea , South America would be the richest place in thw world.
 
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