Coffee House

The economy is booming, says the Bank of England. So why won’t it raise rates?

13 November 2013

12:13 PM

13 November 2013

12:13 PM

Yet another survey suggests that Britain is booming – this time, it’s from the Bank of England’s Monetary Policy Committee. They’re the guys who kept interest rates too low for too long – creating the last boom. It sees another boom now.”For the first time in a long time you don’t have to be an optimist to see the glass is half full,” said Mark Carney, the new BoE Governor. “The recovery has finally taken hold.”

Citi has crunched latest BoE figures (pdf) and says this envisages real GDP growth of a stonking 3.4 per cent next year and 2.8 per cent the year after, which it says is one of the MPC’s biggest-ever upgrades. (They had been expecting 2.7 per cent and 2.5 per cent for 2014 and 2015.) It’s also substantially above the consensus. Happy days.

But, here’s the thing: interest rates will still be nailed to the floor, and a nation of debt addicts will be assured another year (or two) of hair of the dog. The new Governor, Mark Carney, has indicated that he won’t raise rates until unemployment falls below 7 per cent – and today the Bank suggested that this will happen about this time next year, which is substantially sooner than its earlier guess of about this time in 2016. Nowadays, unemployment expectations are as important as inflation expectations. Below shows the MPC’s new best guess:-

[Alt-Text]


Screen Shot 2013-11-13 at 11.57.40

But the below chart suggests base rates won’t start to rise until the year after next – too late for my liking. Savers are being crucified at present, and their wealth is being transferred to debtors. Only an idiot would put savings into a Cash ISA. Money is still being loaned from banks at sub-zero rates, stoking what looks very much like a property bubble. It’s as if the MPC is scared of weaning Britain off the drug of cheap debt – and in so doing, risks repeating precisely the same mistake it made last time.

Still, in the short term, the GDP growth boost is good news for George Osborne. He can’t use the Bank of England’s more optimistic forecasts, he has to use the Office for Budget Responsibility’s predictions, which tend to be much closer to the consensus (latest here).  Is George Osborne’s recovery real or another debt-fuelled illusion? Until rates get back to normal (ie, 4 per cent), we just won’t know.

PS The below graph from the Inflation Report, a funny one, is perhaps worth reprinting. It shows information very useful to ordinary mortgage-buyers, but is annoyingly never printed in the press: when the Bank of England base rate (to which so many mortgages are pegged) is most likely to start rising. Most people think 2015. This shows how expectations have changed over the last few months.

Screen Shot 2013-11-13 at 12.53.01

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Show comments
  • rtj1211

    Is it booming in the Nelson household then? Is it booming in Joe Public’s household??

    You really must distinguish between ‘GDP’ and ‘domestic prosperity’.

    The time to raise interest rates is when it won’t choke the economy. If the ‘economy’ boom is only benefitting those that won’t spend any more anyway, because they’ve already got more than enough, then demand elasticity curves will look rather different to 50 years ago.

    Inflation for the masses is booming: for them, train tickets, energy prices, petrol prices, food prices are what matters. They are roaring away, out of control. They’ll be cutting back on the general economy spending, not splurging.

    For the multimillionaires, mortgages couldn’t be cheaper, credit is historically easy to get hold of and ridiculously cheap, school fees are probably inflationary but little else is. AS you live pretty close to work, all the transport, food, petrol and energy costs are a relatively piddling sum compared to their earnings. School fees are the big one for them.

    You need to return to proper journalism and only survey those on £100k a year per household or less. That’ll tell you whether demand in the economy is roaring away or whether people are still stretched to the limit. You may find very different results for those existing on under £40k per household.

    • HookesLaw

      petrol prices have fallen.

      • Daniel Maris

        That must be the tenth time you’ve told us that. On this occasion it has no relevance to what the poster stated.

      • Tom Tom

        Wow ! They were 54 pence/litre when Labour started……..

    • Daniel Maris

      I agree with just about everything you say. Speccie journos seem to be inhabiting a world from circa 1953 where a GDP rise automatically translated into a rise in prosperity across the nation for all classes. Would that it were so! But it ain’t. We live in a different, much colder and less comforting world.

      I think what might happen in the end is that we have an economic policy designed for “London – Playground of the International Super-Rich” rather than a policy designed for the citizens of the UK.

      The super-rich spivs, the international corrupt set, bring in gazillions to our economy and destabilise the London economy. But as you rightly point out that has nothing to do with how the average Joe is doing in the rest of the country.

      Don’t hold out too much hope for the “proper journalism”.

  • Chris lancashire

    Mr Nelson thinks rates getting back to normal are 4% base. Is that “normal”? It is certainly what we have suffered historically but it was, in the same period, far from “normal” in Germany, USA, Japan and a good many other countries. Perhaps our editor needs to emerge from his time warp and reconsider how rates should develop over the next few years and what factors might influence that.

    • Smithersjones2013

      As it goes from the 1970’s onward until the end of the century interest rates exceeded 5% with peaks of up to 15% and even after they only fell below 4% between 2001 and 2004 before the financial crisis. So even 4% would still be relatively low for the contemporary UK. However I believe before the 1970’s interest rates rarely if ever exceeded 4% for more than a century (but I haven’t confirmed that). There again the UK was a completely different country pre-1970. I agree though Nelson’s assertion that 4% is ‘normal’ doesn’t stand up to scrutiny in the modern era.

      As for comparing them with other countries what is that supposed to achieve? Interest rates are used as a mechanism to control the economy and attract investment. Other countries interest rates are set based on the state of their economies. Therefore interest rates are a reflection of the health of the economy and the economic policies being adopted. Switching interest rates purely because other countries had set their interests at a certain level could turn out to be disastrous if the economy was not able to cope with such interest rates. After all if Japan raised its base rate to 10% would you immediately demand ours should be increased just because they’d changed theirs?

      • Chris lancashire

        I’m not quite sure what your point is but glad you agree that referencing 4% as the norm is a false basis.

        • Smithersjones2013

          My point is that referencing interest rates in foreign countries is irrelevent. It doesn’t matter what were or are ‘normal’ interest rates in the USA or Japan or Germany . What matters is what is the most suitable rate for our economy at any time.

      • Tom Tom

        Interest Rates were low postwar as Financial Repression to pay for the War. Pension Funds were banned from investing in Equities and had to buy Gilts and Consols. Exchange Controls were introduced 1949 until 1980. That is why interest rates were low – because Sterling was pegged to a US Dollar Gold Standard and exchange controls limited capital outflows.

        The situation is completely different today and if interest rates rise QE has to be thrttled back and someone has to work out how to redeem Gilts from the Bank of England without incurring huge capital loss

  • HJ777

    I suppose that the simple answer to Fraser’s question is that inflation is falling and, in theory at least, the Bank of England is supposed to be targeting inflation.

    • rtj1211

      Whose inflation?? Inflation for the average household or inflation for the factory gate??

      The average householder is suffering seriously under inflation and has done for 5 years.

      • HJ777

        Inflation as measured by the CPI, which I would agree is a very imperfect measure as it doesn’t, for example, take account of asset price or public sector inflation.

        I don’t doubt that the average householder has got poorer due to inflation in recent years. That’s not the point though – the MPC is meant to be targeting future inflation.

        • HookesLaw

          We are all suffering the inevitable consequences of recovering from Brown’s massive recession.

          • HJ777

            Inevitably, because we were previously relying on a credit boom to raise living standards, we have now to accept reduced income.

            The recession wasn’t all the creation of Brown (there was an international element), but there is no doubt that his policies exacerbated it considerably – first by ignoring all inflation other than the CPI (while asset price inflation was rampant) and secondly by further fuelling the boom with huge rises in public sector spending and borrowing, all of which was compounded by the poor banking regulatory regime he put in place. At its heart it was just a good old-fashioned credit boom that turned to bust – it just was more extreme and went on longer than ever before. So much for Brown abolishing ‘boom and bust’ – in fact he relied on the boom for what he mistook for economic success.

          • Tom Tom

            You mean Banking Bust…….the outcome of major, massive, systemic fraud in the banking system encompassing LIBOR fraud, Forex Fraud, CMO Fraud, Swaps Fraud, Mortgage Fraud, Bond Market Fraud…..

  • 2trueblue

    Surveys are never a gaurantee, they are a prediction, and as such should not be the only indicator to make such a move as raising interest rates in the short term. It would adversely affect most households and businesses who have mortgages or loans.
    On the other side is the view that people who have saved and provided for their future are treated with scorn for having done so. We obviously should be less frugal?

  • Smithersjones2013

    Fraser really doesn’t want Cameron to win the next election does he? Raising the interests before May 2015 when the biggest issue is cost of living is guaranteed to turn anyone who is not financially comfortable (i.e. they have enough savings so the raising interest rates matters) against the government.

    If hard-working families are hard up already whats going to happen when their mortgage payments increase on top of that? The last thing politicians will want is a procession of sob stories about hard working families who cannot make ends meet or are losing their homes because of financial policy in the run up to elections.

    Yet again we see a complete lack of political nouse from a Tory. They really are crap at politics

  • Alexsandr

    Raising interest rates would put many households into penury as they already struggle to pay their mortgages alongside other bills. Even half a percent could tip manay households over the edge. Until we have wages keeping up with prices raising interest rates would be electoral suicide.
    Yes, I know many have probably over borrowed. But we have to be realistic, don’t we?
    Getting the banks to narrow their spreads would be better. the difference in lending and borrowing rates is massive.
    That’s why I use peer to Peer lending -I get far better return than the useless banks.

    • HJ777

      I think you have a point.

      Until the bust (and it may very well be largely the case still) 40% of mortgages were interest-only, with no repayment vehicle directly attached (that’s not to say that some mortgage holders didn’t have a scheme to pay off the capital later, although I suspect they are in a minority). The problem, of course, with not paying off capital ‘as you go’ is that you remain vulnerable to interest rate rises throughout your mortgage term as you are always paying interest on the original amount borrowed.

    • HookesLaw

      Do we know that thge majority or many households are struggling to pay their mortgages?
      To what extent would a rise in interest rates be met by a reduction in discretionary spending?
      I merely ask. Do we actually know what the situation is.

      The point about rising interest rates is to actually choke off any unsustainable rise in discretionary spending. is that happening? Are there any inflationary signs of that happening? We talk of rises in fuel bills one minute and the next Mr Nelson demands a rise in interest rates? Any rise in CPI inflation because of rise in fuel bills is actually doing the job of riosing interst rates not a reason to put them up.

      • Tom Tom

        Yes. They know exactly how many households are in mortgage arrears, mobile phone arrears, car lease arrears, how many zombie companies there are, how many zombie households…….they keep it a secret so mass-default does not become fashionable

  • Colin Forbes

    Simple answer – the economy isn’t booming, no matter what the pointy heads at the BoE, including the expensive Canadian import, say. It’s just another tedious example of a ‘survey’ being far removed from the reality of the lives that most of us lead under this benighted government. Interest rates were artificially high for many years – a hangover, i suspect, from the era of high inflation – and inhibited real growth and investment. Now we have a period of low rates which will take time – substantial time – to make real inroads into our stagnant economy. When we start actually making things, which add value and create wealth for the country, instead of simply moving money around and pretending that the margins are real profits or ‘growth’, then we’ll be getting somewhere. My slogan for the next election? – Making Britain Great again by making things again.

    • Chris lancashire

      You will no doubt be happy to know that this little corner of Britain which makes things is, indeed, booming.

      • Smithersjones2013

        Of course it would be according to one of Cameron’s little cheerleaders. I’m not so sure the voters of Lancashire more widely will reflect that at the ballot box though.

        • Chris lancashire

          Ah, one of Farage’s little cheerleaders. I was referring to my own business only – doing very nicely thanks.

          • Smithersjones2013

            Glad to hear it. You should be more specific next time. Perhaps change your nom de plume to ‘Chris and his own business’.

            PS And I’m no-ones cheerleader. Political parties and their leaders are a means to an end and not and end in unto themselves. In anycase to wear those rah rah skirts I would have to wax my legs. No thank you!

            • Chris lancashire

              And neither am I but if you make assumptions you will understand that I do too.

              • Smithersjones2013

                It was no assumption. I’ve read some of your posts!

                • Chris lancashire

                  As I have yours!!

                • Smithersjones2013

                  Ah but I’ve never justified voting for my party purely because its not the Labour party. I vote for parties who have positive policies (in my view) to offer

                • Chris lancashire

                  Sorry, bored now.

                • Smithersjones2013

                  There you go you’ve proved my point. Nothing positive to say about your party even when challenged..

                • HookesLaw

                  ha ha ha
                  What an idiot you are.

                • HookesLaw

                  Ya boo sucks. You do not like the message so you took a pot shot at the messenger.
                  You missed.

        • HookesLaw

          Pathetic. You jeer at somebody who does know what is going on in the world, because he actually lives in it.

          You are so indoctrinated with your prejudice you don’t even realise it.

      • Tom Tom

        Then work a lot harder and plug that trade gap

        • Chris lancashire

          We are trying to do our bit. In the last ten years we have increased exports from zero to 15 percent of turnover. Not good enough but there is more to come.

    • HookesLaw

      The BoE are only saying the recovery is taking hold.
      Mr Nelson plays the old journalistic trick of putting words into people’s mouths.
      The industry must be in a bigger mess than I thought if he is getting medals for this rubbish.

  • Colonel Mustard

    “FEDERAL cabinet has ruled that Australia will not sign up to any new contributions, taxes or charges at this week’s global summit on climate change, in a significant toughening of its stance as it plans to move within days to repeal the carbon tax.

    Cabinet ministers have decided to reject any measures of “socialism masquerading as environmentalism” after meeting last week to consider a submission on the position the government would take to the Warsaw conference.”

    http://www.theaustralian.com.au/national-affairs/policy/climate-tax-aid-and-fees-off-table-as-cabinet-toughens-stance/story-e6frg6xf-1226756955449#

    “Socialism masquerading as environmentalism”. Indeed.

    Here we have socialism masquerading as conservatism too.

    • telemachus

      No Mustard

      Socialism has not started

      It will in a short 18 months

      You make Socialism a dirty word

      Most folk round here, when you say the word ‘socialist’ are clueless as to what it means. They fear it might be bad like being a paedophile.

      In truth it is the conservatives and deniers of the benefits of a co-operative society that are bad

      We all look forward to May 2015 and the advent of true Socialism

      • Smithersjones2013

        You make Socialism a dirty word

        No socialists have made socialism a dirty word. We just remind people of that. Come 2015 Miliband and his misfits should make the case against socialism perfectly.

        • telemachus

          The people will firstly begin to get equal opportunities in education, then better health and move towards being free of poverty

          • Smithersjones2013

            Not under Labour they won’t. Why is it 90% of the worst 100 constituencies for unemployment are Labour (heartland) constituencies. Poverty and Labour are inseperable.

            Eventhough many of those constituencies have been under Labour protection for decades, unemployment is still rife and the voters still vote for Labour. It doesn’t sound like those people have received even the most basic education if they still cling to the party that has failed them.

            Keep peddling your fantasy delusions to your hearts content but it won’t change the reality that Labour and Poverty are inseperable partners.

            • telemachus

              If you are sinking you need help
              It is Govian not to comprehend this

              • Neotelemachus

                I suggest you have well and truly sunk Idiot #1. Not even the excellent Michael Gove will be able to save you from the swamp of lies you have sprayed on these august pages. Time to give up old friend and take your medicine like the man you wish you were. Two pints of gold top tomorrow please.

                • Russell

                  I have recommended your comment (unfortunately my recommends or votes down disappear once I log off and back on again and Disqus can’t solve the problem).
                  I have noticed you don’t get many recommends and I suggest that is because your username contains the name of the idiot telemachus. I sincerely recommend and urge you to get a new name.

                • Neotelemachus

                  I am not in it for the recommends my dear Russell,; just to do to the odious telemachus what he has been doing to decent, honest posters here for as long as I can remember. My serious alias gets plenty of recommends but this alias is happy to spread confusion amongst the Idiots 1-6 and their camp followers who plague these pages like a bad smell something fetid and disgusting left behind.

                • Russell

                  Fair enough. By the way…I too am not in it for the recommends, but I do take heart when I see that I get a healthy positive score on my profile and many posters agreeing with many (not all, as to be expected) of my comments.

                • Neotelemachus

                  Take an uptick from me.

                • an ex-tory voter

                  They surely deserve you, keep up the good work.
                  One thing I do find heartening though is the fact that Millimarx feels it necessary to direct them to this site. Maybe their home turf has so few visitors the only way to get their twisted message across is to post it on a busy, interesting and influential site such as this?

              • Smithersjones2013

                If you are sinking then SWIM!
                It is common sense to comprehend that.

          • Colonel Mustard

            No eyewash please. Didn’t happen in the 13 years from 1997 to 2010 with the same goons in power. Literacy rates plummeted. The elderly and hepless inmates of the Mid Staffs death camp didn’t get better help from that champagne drinking weasel Burnham. A whole generation of young people were sidelined into benefits dependency and abandoned when your comrades decided to supplant the indigenous population with foreign voters imported on a massive and reckless scale.

            • telemachus

              I fear that we did not have Socialism until the revisionists left
              2015 will be a revelation

              • Neotelemachus

                Try that in English Idiot #1. Or is your dyslexia making a recurrence? Perhaps Oxford was so long ago you forgot your studies?

              • Colonel Mustard
              • Nicholas chuzzlewit

                Of Fascism.

          • Neotelemachus

            Yes, we weren’t able to do it in the 13 years we had last time so give us another 5 years so we won’t be able to do it again. Good point Idiot #1.

          • Nicholas chuzzlewit

            Tripe. Britain would simply be run by a group of authoritarian Fascists.

      • Colonel Mustard

        Colonel Mustard to you troll boy.

        “Most folk round here, when you say the word ‘socialist’ are clueless as to what it means.”

        Really? The comments show overwhelmingly that “most folk round here” are only too well aware of what the word ‘socialist’ means. It is just you and a couple of other red leftovers from the early decades of the 20th Century who delude yourselves into thinking you are the only ones on the parade marching in step. Get real. Give it up. Go away. Life is too short for you to be indulging in such a pointless exercise that if anything must do more real harm to the Labour party than good because it shows everyone what utter simple-minded loons and liars you all are.

        Here’s another clue for you.

        Colonel Mustard, who detests socialism and socialists and makes no bones about expressing that fact – 4,324 comments and 39,386 positive votes. Ratio 9.11 votes per comment.

        “telemachus associates” who constantly tag and peddle trite and bonkers Labour propaganda with a bit of Stalinism in virtually every thread – 6,029 “comments” and 8,141 positive votes. Ratio 1.35 votes per comment (probably telemachus and his office goon).

        I realise you subscribe to Goebbels ‘big lie’ but even you must realise that won’t work on a blog like this where the predominantly conservative commentators were not born yesterday, were not indoctrinated by left wing academia and who can think for themselves. The greatest reaction you can hope to engender is irritation which means your persistence falls into a very low category of intercourse several leagues down from heckling.

        • telemachus

          It will surprise you to know that I do not court popularity
          I congratulate you on your sycophancy
          However our proposals are not leftovers but the future

          • Colonel Mustard

            Courting Stalinism is more your style.

      • Russell

        No ‘WE’ don’t !

      • Nicholas chuzzlewit

        Socialism is Fascism.

  • Makroon

    Mr Nelson, the famous economic guru should really try to understand that “forecasts” whether from the OBR, the Bank, or his chums at CITI , are not reality and are really not that important (except to speculators).
    Osborne has room to raise income tax thresholds and/or increase incentives for savers in the next budget.
    Unfortunately, he is unlikely to increase incentives to savers, because the pointy heads in the cabinet (Willetts and Letwin et al) have convinced Cameron that frugal hard-pressed pensioners are living the life of Reilly at the expense of the poor, exploited yoof. Indeed, pensioners can probably look forward to the removal of a few perks.
    Of course, Nelson has been a major cheerleader for this crap – so spare us your crocodile tears !!

    • Shinsei1967

      It’s not very helpful to talk of the millions of pensioners as a single block.

      Clearly well-off pensioners, with company final salary pensions, and a house in London or the south east aren’t doing too badly at all, despite the low interest rates.

      And the very poorest pensioners who have to survive solely on the state pension are at least keeping up with inflation as the pension is fixed to RPI.

      It’s the squeezed middle who, like the rest of non-pensioners, are feeling the brunt.

      • Dai Station

        I have ticked agreement to this post but it has to be pointed out that having a house in London or the south east only makes you better off if you sell it and go to live somewhere cheaper.
        In the absence of region specific pay rates (as most London weighting is derisory) many people in the south east have had to spend a far higher percentage of their lifetime earnings on housing, than their equivalents elsewhere. Also, the house or flat they have bought is way inferior to what they would have had in other parts of the country, at less cost. That is their choice perhaps but it is important to realise this when politicians start harping on about mansion taxes for people who have managed to acquire a 4 bed semi on the back of 2 professional salaries.

        • HookesLaw

          Fair points.
          You may not like the London weightings in the public sector but elsewhere there is a premium paid for working there.

      • Smithersjones2013

        It’s not very helpful to talk of the millions of pensioners as a single block.

        Clearly well-off pensioners, with company final salary pensions, and a house in London or the south east aren’t doing too badly at all,
        despite the low interest rates.

        Its not very helpful talking about the utterly vacuous ‘squeezed middle’ either?

        Not only is your argument wrong it demonstrates clearly how you are not taking your own advice about stereotyping large groups and it also demonstrates where your own prejudices lie. Arguably pensioners may well be better off in the north (particularly those on good pensions) because the cost off living is cheaper (and we do not do regional pensions).

        As for the actual worth of one’s property, it is only relevant if you want to sell it. If you don’t and you wish to live in your property it is of no financial assistance at all. Given the work andcost entailed in taking on a new property, I suspect many pensioners would rather stay in their present homes. Consequently their home is of no financial assistance to them except as a last resort.

        PS And I think I would always prefer to be in the middle (squeezed or not) than be poor. Wouldn’t you?

        • Shinsei1967

          Well, I’m stereotyping smaller groups. It’s difficult to make policies unless you assume that groups of people do share common interests.

          The point about the richer pensioners is that they have a comfortable income (thru final salary pensions and RPI-increased state pension) and that their asset base (property and other investments) have appreciated markedly. Plenty of this group will therefore be able to downsize (sell family house with large garden) for a more manageable smaller house/flat.

          However these fortunate pensioners are but a minority of pensioners overall. Raising interest rates might boost the income from their bank accounts, but similarly might knock equity prices or house prices, so the overall net benefit is moot.

          And there is clearly a substantial number of pensioners to whom an interest rate rise will have zero impact as they have minimal financial assets.

          SO I am just highlighting that discussing interest rates as of primary concern to pensioners isn’t accurate. It is of real concern to some, but not most.

          And the ones it does impact are those who aren’t rich (and mutter about low bank rates as they read the SUnday Times Money section as they book another winter holiday) and those who aren’t poor.

          It impacts those who live off their pensions but look to a couple of thousand pounds of interest income from their life saving to pay for the annual holiday or a bike for their grandkid’s birthday.

          I’d say that was the middle and I suspect they feel pretty squeezed.

          • Smithersjones2013

            and that their asset base (property and other investments) have appreciated markedly.

            I live in the South East. I am fortunate to own my property outright. In the last 5 years its value has depreciated by 25%.

            If you hadn’t noticed share prices have taken a considerable hit over recent years and are only now back to previous levels. No doubt there are winners out there but many will have seen their assets dwindle as I have over recent years. However, I’m not yet a pensioner. Does that make me part of the ‘squeezed middle’?

            Furthermore, rather than address your comments to those fortunate enough to be considered relatively well-off across all demographics (why not include Premiership footballers for example) you seem intent on solely using wealthy pensioners (I note you dropped the South East angle). The point is, it is not just about wealthy pensioners, There is no benefit a pensioner accrues from rising interest rates that others don’t accrue as well. If anything your argument has to be about the relatively wealthy full stop.

            It is one thing to make stereotypical assumptions. It is wholly another to make the WRONG stereotypical assumptions because all that wrong assumptions do is make bad policy.

            PS Anybody who has not enough money to cover their expenses is feeling squeezed whatever demographic they are in. The concept of the ‘squeezed middle’ is just another of those ridiculous vacuous sound bites made up by that intellectual pygmy Miliband.

            • Shinsei1967

              1) You’re bringing in a whole host of issues I’m not referring to. I was making a comment specifically about pensioners and interest rates. My point being that (low) interest rates are not of concern to all, or even most, pensioners. Listening to certain lobbyists you’d think all pensioners were suffering because of low interest rates. This simply isn’t the case. The asset rich and the poor have not had their circumstances markedly changed by 4 years of low interest rates. Those in the middle in terms of wealth have.

              2) Sure, house prices outside London may be down from their peak 5 years ago, but shares are up (especially incl dividends) and bonds are at all-time highs. However I’m talking in a longer time frame. 70 years old pensioners, in the south-east, have done very well out of property over their lifetime. The volatility in prices over the last few years makes little odds (unless you assuming pensioners bought their family house sometime in the last ten years).

              • Smithersjones2013

                1) The asset rich and the poor have not had their circumstances markedly changed

                Well I’ve already demonstrated that is not the case as far as the ‘asset rich’ is concerned. 5 years of potentially low income streams from interest will have markedly changed their circumstances but not to the point where they are over-extended (for example Abramovich lost a fortune over the crisis)

                Now if you are saying that its the middle who have over-extended by grabbing every piece of credit (credit the poor would never be offered) they could (and much more than they could realistically afford) during the good times in the belief that there was no more boom and bust and now the bust has occurred they are in trouble I agree.

                Of course everything should be done to aid them but scapegoating those (pensioners or not) who have managed their finances adequately because those who didn’t are now feeling squeezed is wrong.

                Now if you had restrained your point to the argument

                My point being that (low) interest rates are not of concern to all, or even most, pensioners.

                I would not have disagreed. But you just can’t keep it to that can you?

                However I’m talking in a longer time frame. 70 years old pensioners, in the south-east, have done very well out of property over their lifetime.

                Do you seriously think people up north haven’t similarly benefitted relatively? Or people in the Midlands or the South West?

                Why can’t people up north down-size? Are all houses up there valued the same?

                And furthermore are you trying to tell us that assets can not appreciate in the same manner or better over the next 70 years?

                Why are you picking on the current generation of pensioners (who have lived through far tougher times than the vast majority of younger generations including my own have)

                Frankly the more you post the more prejudiced and unrealistic your view of Pensioners (particularly ones who have managed their affairs sensibly) seems. And If what they’ve done is so wrong then surely we should deny all younger and future generations the opportunity to do the same (abolish home ownership, share ownership etc etc). What do you think?

        • Russell

          Many of the ‘squeezed middle’ have received reductions in their mortgage payments amounting to £hundreds per month, so are not as squeezed as made out to be,

          • Smithersjones2013

            Indeed it’s all relative and dependent on whether people have managed their finances in a sustainable manner.

    • HookesLaw

      The BoE are not saying the economy is ‘booming’ they say the recovery is taking hold. They predict shock horror that the economy will grow 2.8% next year.

      On a day that inflation falls (thats ‘falls’) Mr Nelson demands that interest rates are put up.
      If ‘guru’ is indian for thick headed painted into a corner idiot then Nelson is indeed a guru.

      • Makroon

        The Bank has “raised it’s forecast for GDP growth in 2013 to 1.6%”.
        2013 has one and a half months to go. Growth so far (first three quarters) is ~1.9%. All surveys point to a slight further acceleration in economic activity in October.
        Why are the Bank suggesting that growth in the 4th quarter will be -0.3% ?
        Answer: because it’s not a “forecast”, it’s a conservative assumption.
        (take a look at their fan diagram).
        In the US, they would say that UK GDP is presently growing at an annual rate of over 3%.

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