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Interest Rates. Why So Low?

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2 hours ago, Waldo said:

If I had masses of fiat currency, I'd be looking seriously to convert it to other stores of value.  Gov borrowing and spending due to pandemic, I can only think long term, is going to devalue our currency.

Compared with what? America, the EU - everyone is taking a hit. 

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16 hours ago, Anna B said:

 Average interest rates on a personal loan is 9.41%  (according to Experian data from Q2 2019.)

Depending on the lender, and the borrower's credit score and personal financial history, personal loan rates can range from 6% to 36%  

Student loans are currently 5.6%

So not cheap.

But especially considering they are getting our money for free (almost 0% interest) when we lend it to them. Hardly seems fair.

I recall seeing rates of 18% when I was think about borrowing a couple of thousand, it seems anything over £4,000 is less than 10% (Nationwide) but less than £4,000 is conciderably more

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3 hours ago, tinfoilhat said:

Compared with what? America, the EU - everyone is taking a hit. 

Sure, I think they’re all likely to be devalued as a result of Covid.

 

I mean compared to other stores of value (that are not fiat currencies), so maybe precious metals, gem stones, bitcoin, property maybe, share in the right kind of business.

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19 minutes ago, Waldo said:

Sure, I think they’re all likely to be devalued as a result of Covid.

 

I mean compared to other stores of value (that are not fiat currencies), so maybe precious metals, gem stones, bitcoin, property maybe, share in the right kind of business.

Think again!

 

The amount of quantative easing in 2009 was £200 billion, in 2020 quantative easing was £2,285 billion, wow just wow.

 

https://www.bankofengland.co.uk/monetary-policy/quantitative-easing

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Interest rates are at historically low levels because they need to be.  Yes the banking crisis was over a decade ago but economies and credit flows  around the world have not recovered.

Inflation was 0.6% last year, that’s far too low and well under the Bank of England’s target, any increase in interest rates would further depress this.

Central banks put interest rates up to cool an economy that is growing too fast, hence there has been no reason to do this since the financial crisis.

I understand older savers being frustrated as they were told be sensible, pay off your mortgage and save but they have had it good compared to the younger generation.

10%+ interest rates would see half the country lose their homes, the older generation benefitted from cheap housing, a healthy jobs market (mostly), good pensions compared to today, free university education and huge increases in property values. If a lack of interest on their savings is the only downside they are very lucky, many people today will do well to be able to buy a house, never mind build up a good pension and savings.

Also the focus on the likes of Jeff Bezos is a waste of time, yes there are some issues around fairness but if people think that by heavily taxing these types of people we will solve the worlds problems they are greatly mistaken. There wealth is a drop in the ocean when taken in context.

Bezos is worth $131bn dollars (mostly through Amazon stock - this can go up or down), Joe Biden has announced the latest stimulus programme in the US is going to be worth 2 trillion dollars! So you tax Bezos a few billion a year, it’s nothing in the scheme of things.

Also where do people think pension funds and savings plans get their profits to grow people’s retirement plans - through investing in businesses like those run by Bezos. The better these businesses do, the better your pension pot performs.

Capitalism is far from perfect and there are some structural issues at the moment that need to be sorted, but focusing all your anger on those at the top is no different to blaming immigrants for societies ills.

The real problems are elsewhere but both sides of the political spectrum would rather focus your attention on easier targets.

 

 


 

 

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28 minutes ago, Westie1889 said:

Interest rates are at historically low levels because they need to be.  Yes the banking crisis was over a decade ago but economies and credit flows  around the world have not recovered.

Inflation was 0.6% last year, that’s far too low and well under the Bank of England’s target, any increase in interest rates would further depress this.

 

I just did a quick Google, 23 countries have a zero interest rate, 3 have a negative rate.  The countries that have higher rates are not in the G20, I am guessing.

I dont believe that is a good thing, but if the other countries are doing it, then we must too. Probably all down to how much money is circulating.

I fixed the interest rate on my mortgage, but the rates are only going down at the moment, unless the QE, debt and lower GDP changes things.

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8 hours ago, Anna B said:

That doesn't take into accounts student living costs which are outside the student loan costs. Student accommodation has also been upgraded in many instances and is now very expensive. Students usually have to take on personal loans to pay these, and these costs have to be repaid in full plus (high rate) interest. 

"Interest Rates. Why So Low?"

Is your topic about the cost of higher education?  

Young people benefit massively from low interest rates and low inflation but they suffer from not being able to raise the capital for a mortgage deposit.  The "Student Loan" has a negative impact on getting credit. As explained the "Student Loan" system is about making an income based contribution to their University costs. The vast majority will barely repay the capital borrowed  let alone the interest before it is written off after 30 years.

 

 

 

 

 

 

 

 

 

 

 

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3 hours ago, Westie1889 said:

Interest rates are at historically low levels because they need to be.  Yes the banking crisis was over a decade ago but economies and credit flows  around the world have not recovered.

Inflation was 0.6% last year, that’s far too low and well under the Bank of England’s target, any increase in interest rates would further depress this.

Central banks put interest rates up to cool an economy that is growing too fast, hence there has been no reason to do this since the financial crisis.

I understand older savers being frustrated as they were told be sensible, pay off your mortgage and save but they have had it good compared to the younger generation.

10%+ interest rates would see half the country lose their homes, the older generation benefitted from cheap housing, a healthy jobs market (mostly), good pensions compared to today, free university education and huge increases in property values. If a lack of interest on their savings is the only downside they are very lucky, many people today will do well to be able to buy a house, never mind build up a good pension and savings.

Also the focus on the likes of Jeff Bezos is a waste of time, yes there are some issues around fairness but if people think that by heavily taxing these types of people we will solve the worlds problems they are greatly mistaken. There wealth is a drop in the ocean when taken in context.

Bezos is worth $131bn dollars (mostly through Amazon stock - this can go up or down), Joe Biden has announced the latest stimulus programme in the US is going to be worth 2 trillion dollars! So you tax Bezos a few billion a year, it’s nothing in the scheme of things.

Also where do people think pension funds and savings plans get their profits to grow people’s retirement plans - through investing in businesses like those run by Bezos. The better these businesses do, the better your pension pot performs.

Capitalism is far from perfect and there are some structural issues at the moment that need to be sorted, but focusing all your anger on those at the top is no different to blaming immigrants for societies ills.

The real problems are elsewhere but both sides of the political spectrum would rather focus your attention on easier targets.

 

This, taken verbatim from business pages of today's DM. There are many other similar examples:

 

' Cineworld is facing an investor backlash over plans to pay bonuses worth up to  £65 million to its chief executive despite receiving taxpayer cash to survive the pandemic.

More than 5,000 staff have been furloughed while its 127 UK cinemas are shut. But next week the board will try and push through a pay policy and long term bonus scheme that could hand bosses up to £208 million.'

 

That doesn't sound like an economy that hasn't recovered, that sounds like 'having your cake and eating it.'

Edited by Anna B

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6 hours ago, Anna B said:

This, taken verbatim from business pages of today's DM. There are many other similar examples:

 

' Cineworld is facing an investor backlash over plans to pay bonuses worth up to  £65 million to its chief executive despite receiving taxpayer cash to survive the pandemic.

More than 5,000 staff have been furloughed while its 127 UK cinemas are shut. But next week the board will try and push through a pay policy and long term bonus scheme that could hand bosses up to £208 million.'

 

That doesn't sound like an economy that hasn't recovered, that sounds like 'having your cake and eating it.'

It’s one business so of minuscule relevance when you take into account the scale of the World economy. Yes there will be others and it may be immoral but overall it’s a sideshow and not a relevant point when discussing interest rates.

 

Economists estimate the banking crisis has so far cost every person in the UK £21,000 on average.

It took until December 2019 for inflation adjusted wages to pass their 2008 level pre-banking crisis - thats 11 years of lost growth.

Businesses are still struggling to obtain lines of credit from the regular banking system and often have to revert to other means of borrowing.

QE is a form of life support for the financial system and it’s being used throughout the UK and Europe at the moment as it was through the banking crisis for several years.


Because the jobs market has been relatively healthy pre-Covid it’s easy to assume everything is fixed - but it’s not. The impact of the banking crisis will be felt for a long time yet unfortunately.

 

Raising interest rates would suck more cash out of the system, resulting in more business failures and more unemployment.


The only positive in all of the current borrowing is that we have the Bank of England so are in effect lending to ourselves. It’s very doubtful we will ever pay it back in full.

Much of the banking crisis debt is rolled over in that the Bank lends fresh money to us so we can pay the previous loans from them and the huge benefit here of low interest rates is that our interest payments are far lower than they could be which benefits the public purse and ultimately public services etc

There is a push in some quarters of the Conservative party for the Bank to write the debt off, it’s not something that historically governments want to be seen to do but before Christmas the bank ‘quietly’ wrote-off £150bn of debt owed to it by the government so maybe they are going down that route already.

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8 hours ago, Anna B said:

' Cineworld is facing an investor backlash over plans to pay bonuses worth up to  £65 million to its chief executive despite receiving taxpayer cash to survive the pandemic.

More than 5,000 staff have been furloughed while its 127 UK cinemas are shut. But next week the board will try and push through a pay policy and long term bonus scheme that could hand bosses up to £208 million.'

I know Cineworld is an international company, so although its UK staff needed help from the tax payer; its an international business that needs a chief exectutive that is paid relative to other companies of that size.

I agree that those at the top seem to be well paid what ever happens, but that is a matter for the share holders.

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8 hours ago, El Cid said:

I know Cineworld is an international company, so although its UK staff needed help from the tax payer; its an international business that needs a chief exectutive that is paid relative to other companies of that size.

I agree that those at the top seem to be well paid what ever happens, but that is a matter for the share holders.

Well paid? I think obscenely well paid is closer the mark. 

 

Prior to Thatcher's reign those at the top were paid roughly 5 - 15 times the pay of the average worker. Now it's more like 2,000 times the pay of the average worker - how did that happen? And so quietly.

Compare that to the furore  when miners wanted the princely sum of £100 a week. Chaos, strikes, blackouts, arrests, mounted police charging at people and pitched battles.

 

As for shareholders taking action - there have been many well documented cases where they have overwhelmingly voted against such bonuses etc only to be totally ignored.  When Companies/CEOs get to this size the power they wield can slay all before it.

Edited by Anna B

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2 hours ago, Anna B said:

Prior to Thatcher's reign those at the top were paid roughly 5 - 15 times the pay of the average worker. Now it's more like 2,000 times the pay of the average worker - how did that happen? And so quietly.

Compare that to the furore  when miners wanted the princely sum of £100 a week. Chaos, strikes, blackouts, arrests, mounted police charging at people and pitched battles.

Part of the reason that top company directors are paid more, is that companies are always merging and forming bigger companies.

Many companies are now international, just look at McDonald's for instance.

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