Bank of England Base Rates - Where are they going?

[mrblonde]

I know many people who could get into serious difficulty if the rate where to move quickly. This bank of engand base rate chart suggests that the rate isnt likely to move until the end of the year and then only very marginally.

 

Do you think inflation could become a problem and push up the rates dramatically?

[banker_rhymes_with]

Hello Mrblonde!

 

Welcome to CAG.

 

I think the price of Gold is a fairly good indicator that many people think inflation is coming, and it will shoot up when it starts to rise (and with it Base Rates).

 

I think many will also agree that inflation has started to rise, but we are being spoon fed manipulated figures to try and keep a lid on it.

 

Hands up all those who feel that most things are rising in price and/or you are getting less for your money?

 

Fuel?

 

Food?

 

Basic Services?

 

A few things have been kept down, and/or have been propped up to stop their prices shooting through the floor such as, for example, Cars.

 

I think inflation will come back, and it will be a big problem. Indeed, the main concern I think is Stagflation, i.e. inflation in a stagnant economy.

 

The banks are hiding a lot of the bailout money. The money has disappeared. Very little has appeared to help the economies affected (that'll be most of them then). This is because bankers at the top of the food chain, i.e. the Central banks, will have made another fortune or three, but the rest of us have seen almost nothing of the trillions pumped in to save the banks.

 

However, at some stage, the bankers hoarding the bailout funds will be keen to start spending it. I think they are just holding back until the time is right, i.e. we are all flat on our backs panting for breath...

 

...then it'll be a fat banker waddle race to mop up our assets while they are still at knock-down prices, before the impact of this spending starts to kick start the inevitable inflation that will follow.

 

Turnip Land

 

If you can imagine an economy that makes only 100 Turnips per annum, that has just £100 of cash in its economy, then it would be no surprise that each Turnip is priced at £1 each.

 

Turnips = £1

 

Then mix in a bank or two that loves to generate Debt to entice people make and buy things the people do not actually need, such as throw away Turnip dusters, and plastic Turnip display stands, and Turnip polish.

 

The banks will encourage these activities, and will help the people of Turnipland by inventing clever financial products to sell to them, such as Turnip Insurance, and Turnip Bonds, and Turnip growers' pensions, and Turnip growers' Mortgages, and the Platinum Turnip Credit Card and...before you know it, the people of Turnipland will be getting further and further into Debt.

 

Turnips = £1.20 each

 

The Money Supply in Turnipland will keep rising as the people of Turnipland borrow more and more Debt into existence, so the price of Turnips will creep up in line with this (because the economy only produces 100 Turnips and yet the Money Supply grows each year forcing up the price of Turnips).

 

Turnips = £1.40 each

 

Soon the people of Turnipland won't bother growing Turnips, they'll be convinced that growing Turnips is a waste of time, they'll import them instead, and concentrate on making and selling top class Turnip dusters, plastic Turnip display stands and Turnip polish!

 

Imported Turnips = 90p each

1st Class Turnip Dusters = 40p each

1st Class Turnip Display Stands = 75p each

1st Class Turnip Polish = 60p a tube

 

Their bankers won't stop them, because by then they will be making more and more money selling fresh air dressed up as Financial Products, and raking in the interest on the growing level of Debt (the money to pay the interest being covered by new Debts that borrow even more money into existence...the Turnipland Money Supply banking balloon starts to pump up).

 

Due to the magic of banking, the people of Turnipland will soon be racing around like busy little bees, convinced they have a thriving economy, and flat out building Enterprise Parks and Retail Parks all over their Turnip fields, so they can make, stock and sell more top class Turnip dusters, plastic Turnip display stands and Turnip polish!

 

Pretty soon they'll not bother making any of that stuff, but will import these items instead (albeit 2nd class products that last 2 weeks only).

 

Imported Water Injected Trans-Fat Turnips = 42p each

2nd Class Turnip Dusters = 30p each

2nd Class Turnip Display Stands = 32p each

2nd Class Turnip Polish = 10p a tube

 

Everyone is instantly better off, because prices have fallen, albeit at the cost of quality.

 

Their bankers won't mind one bit, because by then they'll be going great guns working in tandem with their new banking friends from across the water who will be telling them how easy it is to make even more money by selling things to other bankers (who they've never met) in other lands far away...then betting on the price fluctuations. They can't go wrong, all they can do is get richer, and laugh at the people of Turnipland racing around selling imported Turnips and related Turnip products, and engaged at the lower levels of the banking economy selling Turnipland Financial Products to each other.

 

The bankers in Turnipland will get bolder and more clever, and will build up obscene levels of banking Debts, as they bet on larger and larger portfolios of invisible Turnip Backed Receivables, which they immediately Securitise and then repeat the whole process all over again, and again, and again, and again.

 

Then, one fine day, the bankers over the hill who had been telling the Turnipland bankers what to do, and pretending to bet with them over the price of these clever products that none of the Turnipland bankers understood anyway, will suddenly stop answering the telephone.

 

The Merry-go-Round will suddenly stop.

 

The Imports of Turnips will stop.

 

The Imports of Turnip dusters, and plastic Turnip display stands and Turnip polish will stop.

 

The cash tills in the Retail Parks will stop.

 

Everyone will be looking at each other and wondering what to do.

 

Nobody can remember how to grow Turnips, let alone make the daft products they all now seem to depend upon. Half of the people of Turnipland are now only able to sell Financial Products, the rest can only sell Imported Turnip products. The main thrust of the economy is now banking, which is far more important, of course, because that makes everyone in Turnipland richer and better off. Nobody can afford to buy homes any longer without a huge Turnip bank Mortgage, but they are richer and better off, because the size of their debts confirm this. The only way to pay those debts is via the magic of banking, as any fool can see.

 

What's the solution?

 

Easy, the bankers of Turnipland will simply persuade the Politicians to inject £5,000 into the economy, so they can pay the bankers over the hill £4,800. The remaining £200 pumps up the Turnipland Money Supply to get their stagnant economy rolling again, and the prices start to rise...

 

Imported Water Injected Trans-Fat Turnips = £1.10 each

3rd Class Turnip Dusters = 45p each

3rd Class Turnip Display Stands = 52p each

3rd Class Turnip Polish = 21p a tube

 

The people of Turnipland do not spot that the prices are rising and quality falling, and have not realised that the poor people in other lands do not trust the currency of Turnipland any more, ever since the banks in Turnipland started printing it!

 

But, nothing seems to have helped. Everyone in Turnipland is still short of money despite the £5,000 bailout that the magic of banking has allowed them to borrow into existence, and injected into their banks to save themselves with. They find it hard to pay the new Turnip bank Bailout Taxes, and even harder to cover the rising cost of Imported Water Injected Trans-Fat Turnips, 3rd Class Turnip products and the now essential Financial Products of their ultimate saviours, the Turnip banks.

 

Nobody likes the taste of the new cheaper Water Injected Trans-Fat Imported Turnips, and everyone has lost interest in polishing them and dusting them, and placing them in a pointless stand before eating them.

 

Soon the people of Turnipland find it even harder to pay their Turnip Mortgages, and to keep up the payments on their Platinum Turnip Credit Card (issued from over the Hill and far away and not locally as they all thought)...soon they are in Arrears with everything, and their businesses are going to hell on a handcart, because nobody wants to buy anything they have to sell...let alone eat it!

 

People start to lose their homes, and see their businesses go belly up...

 

...then the bankers from across the hill creep in and start to buy up everything in sight at knock-down prices! After all, the bailout balance of £4,800 they engineered goes a long, long way in Turnipland!

 

What do you think will happen next...

 

Imported Artificial 100% Trans-Fat Turnips = £ ?

4th Class Turnip Dusters = £ ?

4th Class Turnip Display Stands = £ ?

4th Class Turnip Polish = £ ?

 

Turnipland Housing Market = £ ?

 

 

Watch this space!

 

Cheers,

BRW

Edited July 13, 2010 by banker_rhymes_with
Clarity

[citizenB]

Nice one, BRW.