I started this blog in June 2007 asking these questions: Are we in a massive asset bubble that will blow up in our faces ??? - ANSWERED YES ! Is western and particularly British society on the verge of social collapse??? What are the best common sense long term investment strategies to keep you rich? When will consumption/debt bubble economics end and a real savings/production economy begin ???

Thursday, 8 January 2009

Britain's zimbabwe economy - going to print money until all debts are gone and savers are wiped out !

Bank cuts interest rate to all-time low of 1.5%

The Bank of England today ordered another half-point cut in interest rates to just 1.5 per cent, the lowest in 314 years, as it kept up its aggressive campaign to breathe life into the stalled economy.

The Bank’s further move came hard on the heels of cuts of 2.5 percentage points over the past two months alone.

But the move will disappoint struggling businesses and fearful workers and consumers, who were hoping for a more radical cut by another full percentage point or more.

The latest cut came amid soaring fears over Britain’s rapidly worsening prospects following a deluge of dire economic news and a mounting toll of job losses.

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Chancellor set to print more cash as interest rates hit record low

Alistair Darling is considering printing more money in an attempt to ease the credit crunch.

As interest rates appear certain to fall to an historic low today, the Chancellor and Mervyn King, the Governor of the Bank of England, are looking at expanding the money supply by billions and using the extra cash to buy assets ranging from government or commercial debt to private equities.

The Bank’s Monetary Policy Committee began its two-day meeting to decide interest rates yesterday as the grim toll of job losses and closures continued. Viyella, the fashion business, went into administration, putting at risk 450 jobs at stores around the country. Marks & Spencer confirmed that it was cutting 1,200 jobs and closing 27 stores. Another 1,000 jobs are under threat at Cattles, the finance firm, and Barclays cut 400 jobs from its IT departments.

Today base rates are expected to fall to their lowest level since the Bank of England was founded in 1694. The markets expect a drop of at least 0.5 points to 1.5 per cent or even lower.

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Punish savers and make them spend money
Near-zero interest rates and even a tax on bank deposits are necessary to force those with cash to use it productively

The battlelines are drawn. On one side we have the Labour Government and the Liberal Democrats, the Bank of England, the US Federal Reserve Board and the vast majority of Keynesian economists in every country - plus Barack Obama. On the other side, the Tory Opposition, the German Socialists, the European Central Bank, the Church of England and the vast majority of Marxist economists in every country - plus the British public. The question, of course, is what to do about the recession. Specifically whether the way out is “to spend, spend, spend or to save, save, save” - as David Cameron has so clearly put it.

I believe, in line with the vast majority of non-socialist economists, that Mr Cameron's campaign for savings is completely wrong; that “borrowing our way out of debt”, paradoxical as it sounds, is exactly the right prescription for our present problems. This paradox is easily explained: if governments or wealthy individuals increase their borrowings they replace weak debtors - bankrupt hedge funds, struggling businesses or repossessed homeowners - with strong ones and this helps to stabilise the financial system and sustain economic activity and employment. The country can borrow its way out of debt.

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