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ECB Rate set to drop another 50 Points


Propforward

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Nov 7, 2007
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149
ECB set to cut interest rates to record low - The Irish Times - Thu, Mar 05, 2009

A few questions:

Would the ECB not be a lot more effective just dropping the rates to 0 and slowing down the recovery - the drip drip drops don't seem to be having the jump start required?

Is the ECB's economic influence not immasculated when divorced from a joined up tax strategy? - i.e. basic way to stimulate economy is reduce tax and lower interest rates

Should new bank regulations force variable interest rates to be tracker rates? Why should banks have discretionary power over interest rates within a variable interest agreement?
 


atlantic

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Jan 25, 2008
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649
The reason we got into trouble was because of low interest rates,so the ECB is doing the same thing again,but people are still afraid.They are afraid for their jobs so they will hoard,they beliieve house prices are still to high and looking for them to fall further.
All governments love inflation,the nastiest silent tax on people,as it fills the coffers and allows them to spend like a shopaholics.
Deflation they say is bad for whom,the person that can buy a cheaper house,cheaper goods.
 

Propforward

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Joined
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Messages
149
The reason we got into trouble was because of low interest rates,so the ECB is doing the same thing again,but people are still afraid.They are afraid for their jobs so they will hoard,they beliieve house prices are still to high and looking for them to fall further.
All governments love inflation,the nastiest silent tax on people,as it fills the coffers and allows them to spend like a shopaholics.
Deflation they say is bad for whom,the person that can buy a cheaper house,cheaper goods.
Going down a hill is dangerous if you accelerate but you can't get up a hill without accelerating.
What happened to us was we accelerated up the hill and couldn't stop at the edge - so we plummeted to the bottom.

Now we need the stimulation that low taxes and interest rates provide. People will instinctively hoard and hold fast but as the environment remains consistent and favourable they will slowly start to emerge and spend.
Companies will start to get business and find they need to employ new people.

Deflation is great for a season but it disincentivises enterprise and effort as rewards are diminishing.

We should be borrowing out of the recession, i understand that the national debt is ridiculous but we need petrol to get back up that hill.
We need better regulation of the entire economy and more accountable and responsible government.
 

atlantic

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Jan 25, 2008
Messages
649
Borrowing to consume,we can not spend our way out of a depression,we have to start producing things that we can export.Everything reaches a top and now it has to reach a bottom and the 4million people will say when they are happy to start spending.
I agree with low taxes but that ain't going to happen unless government spending and cuts are got under control.
Low interest rates,the Government and banks are at it again trying to coax young people by offering €1000 and rates @2.45% fixed for a year.This is awful carry on.What happens when interest rates rise.
If they want to help young people they should set the rate at 5% for 10 years and if rates are below this the extra money should be put in a seperate account to pay of some of the principal 10 years later .At least they would have the comfort of a fixed cost and little bit saved at the end.
Going down a hill is dangerous if you accelerate but you can't get up a hill without accelerating.
What happened to us was we accelerated up the hill and couldn't stop at the edge - so we plummeted to the bottom.

Now we need the stimulation that low taxes and interest rates provide. People will instinctively hoard and hold fast but as the environment remains consistent and favourable they will slowly start to emerge and spend.
Companies will start to get business and find they need to employ new people.

Deflation is great for a season but it disincentivises enterprise and effort as rewards are diminishing.

We should be borrowing out of the recession, i understand that the national debt is ridiculous but we need petrol to get back up that hill.
We need better regulation of the entire economy and more accountable and responsible government.
 

meriwether2

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Joined
Nov 15, 2008
Messages
140
The reason we got into trouble was because of low interest rates,so the ECB is doing the same thing again,but people are still afraid.They are afraid for their jobs so they will hoard,they beliieve house prices are still to high and looking for them to fall further.
All governments love inflation,the nastiest silent tax on people,as it fills the coffers and allows them to spend like a shopaholics.
Deflation they say is bad for whom,the person that can buy a cheaper house,cheaper goods.

Deflation is a disaster for everyone. It completely retards consumer spending, as consumers delay spend as they feel goods will get cheaper.

This leads to a collapse in the government funds, which leads to all manner of problems for everyone.
Yes, your car will cost 2% less, but you'll wish it didnt in 12 months when there is no money for essential services.
 

revereie

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345
Atlantic, you demonstrate a woeful knowledge of basic economics and currentaffairs

You say we should export, not spend - but there's no-one to buy the goods as they're not spending either.

This crisis has hit exporting countries hard - witness the travails of Japan, German and now China.
 

TradCat

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Jun 5, 2005
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1,992
Deflation is a disaster for everyone. It completely retards consumer spending, as consumers delay spend as they feel goods will get cheaper.

I'm doing it already. I want to change my car but I'm convinced they will be cheaper next month. And I'm trying to sell a house and everybody else is convinced that will get cheaper. So activity slows to a crawl. It's a very hard cycle to break out of.
 

constitutionus

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well on OP as a joe soap these drops are the only real bright spot on the horizon. if they dropped to zero now you'd kill that sentiment for a one off gain.

i mean realistically we're talking at least another one or two to come in the near future. i know i cant speak for everyone but getting the extra money back in my pocket makes me feel good and im spending it and knowing more are coming instead of rises is a relief, so its working as a tactic for SOME of us at least.
 

forest

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I noticed ads reappearing for mortgages again (the one where the actor gets a loan)
I don't know if thats good or bad
 

Oriel27

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well on OP as a joe soap these drops are the only real bright spot on the horizon. if they dropped to zero now you'd kill that sentiment for a one off gain.

i mean realistically we're talking at least another one or two to come in the near future. i know i cant speak for everyone but getting the extra money back in my pocket makes me feel good and im spending it and knowing more are coming instead of rises is a relief, so its working as a tactic for SOME of us at least.
Yea i have 3 years left on a fixed mortgage at 4% with bank of ireland.

there could be a penality to pay to get out of it.

would it be worth paying, and how long will these rates keep down, do ye think?

i fixed it in the first place as they were rising like mad.
 

Factorem

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Isn't there a floor in most variable rate mortgage contracts?

2% or 3% I believe it is.
 

Victor Meldrew

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Jun 8, 2007
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7,172
Low interest rates,the Government and banks are at it again trying to coax young people by offering €1000 and rates @2.45% fixed for a year.This is awful carry on.What happens when interest rates rise.
If they want to help young people they should set the rate at 5% for 10 years and if rates are below this the extra money should be put in a seperate account to pay of some of the principal 10 years later .At least they would have the comfort of a fixed cost and little bit saved at the end.
Heard a good podcast from Chicago Public Radio yesterday about guys buying foreclosed properties off the banks in the US for about 30% - 50% of the outstanding mortgage. So what was a $600K house with a $450K loan is sold for ~ $200K. It's considered a toxic debt and has not been sliced, diced and repackaged then resold as a mortgate backed security. So in essensce it's the simplest of the "toxic assets" out there. The overall thrust of the piece is that the US is grossly over extended in terms of personal debt, and that grim adjustments like this need to happen.

The guy who buys the foreclosed house can now re-cut the deal with the homeowner or the homeowner walks away from the house...

Interest rates at 0% is only the start. We need the above on a grand scale to fix the economy. Think of the pay cuts the young mortgage paying classes (27 - 40 year olds) could take if we wrote down mortgage debts to realistic, sustainable levels, think of the boost to competitiveness. Think of no longer hanging on a 0.25% or 0.5% interest rate change to tell you if you can afford another child....
 

Victor Meldrew

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Isn't there a floor in most variable rate mortgage contracts?

2% or 3% I believe it is.


I know there is a gap between ECB and your rate of between 0.4% and 1.4% depending on your Loan to Value Ratio ("Stop laughing in the back...!")

Was not aware of a floor though
 

atlantic

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Messages
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Is that right and your something of an expert.
Atlantic, you demonstrate a woeful knowledge of basic economics and currentaffairs

You say we should export, not spend - but there's no-one to buy the goods as they're not spending either.

This crisis has hit exporting countries hard - witness the travails of Japan, German and now China.
 

Propforward

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Joined
Nov 7, 2007
Messages
149
Borrowing to consume,we can not spend our way out of a depression,we have to start producing things that we can export.Everything reaches a top and now it has to reach a bottom and the 4million people will say when they are happy to start spending.
I agree with low taxes but that ain't going to happen unless government spending and cuts are got under control.
Low interest rates,the Government and banks are at it again trying to coax young people by offering €1000 and rates @2.45% fixed for a year.This is awful carry on.What happens when interest rates rise.
If they want to help young people they should set the rate at 5% for 10 years and if rates are below this the extra money should be put in a seperate account to pay of some of the principal 10 years later .At least they would have the comfort of a fixed cost and little bit saved at the end.

So what about borrowing not to consume but to shore up foreign investment and create indigenous industry?

We are caught in a pickle because we can't compete on an export market with far east countries cost structures without impoverishing our nation.
 

Metric

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Nov 19, 2008
Messages
101
Low interest rates,the Government and banks are at it again trying to coax young people by offering €1000 and rates @2.45% fixed for a year.This is awful carry on.What happens when interest rates rise.
If they want to help young people they should set the rate at 5% for 10 years and if rates are below this the extra money should be put in a seperate account to pay of some of the principal 10 years later .At least they would have the comfort of a fixed cost and little bit saved at the end.
I disagree with it being "awful" carry on. The awful carry on by banks was lending to people who they did not carry out detailed enough employment background checks or lending to people money way in excess of what they could afford.

There are still plenty of young people out there looking to purchase property who CAN afford it and are looking for deals from banks as well as waiting for the right price.

Fixing rates like you are suggesting there just doesnt make any sense. You are talking about a lender making a provision for either the loan they shouldnt be giving out in the first place or a provision for the buyers naievity. Rates are there for you to chose from and are costed so the bank can make a profit. Making an informed decision or getting good independent advice well increase the chance of getting the term right.

Of course the culture of years ago was to just buy buy buy and not think about it-thankfully this recession will ensure that there will be a lot less people sucked into bad mortgages in the future. I hope!
 

atlantic

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I agree create indigenous added value industry in something like aquaculture and farming these are resources we have in abundance.Time to get creative and add some value and niche to products.
So what about borrowing not to consume but to shore up foreign investment and create indigenous industry?

We are caught in a pickle because we can't compete on an export market with far east countries cost structures without impoverishing our nation.
 

constitutionus

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23,339
Yea i have 3 years left on a fixed mortgage at 4% with bank of ireland.

there could be a penality to pay to get out of it.

would it be worth paying, and how long will these rates keep down, do ye think?

i fixed it in the first place as they were rising like mad.

actually man that looks like not only a good rate but a GREAT rate. :)

im with first active and it went up to near 7% at one stage. even now with all the reductions im only at 4.10%. this latest reductions will put me under your rate at about 3.60% but its literally took THIS long to get there.

depending on the cost you might be better off sticking with it for the 3yrs till you get out of it penality free as they WILL charge you

remember unless your on a tracker your not going to get the rate the ECB is giving so it could be as good as you get.

EDIT. oh and its just been made official on newstalk that the 0.50% HAS come off. :)

EDIT 2 : ********************ers look like they ARENT going to pass it on to me. might be time to shift it now.
 
Last edited:

Analyzer

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Current EU/ECB economic policy effectively amounts to having an interest rate low enough to cause a ponsi scheme somewhere or other.
 

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