Cable Forum - View Single Post - What George Osborne isn't telling you, and doesn't want you to know.

Ignitionnet · 05-12-2014, 16:01

Nothing new. His original deficit reduction plan involved an expansion of private debt too.

EDIT: Oh look, big expansion in mortgage debt thanks to a nice fat increase in house prices. Keep wages down, feed the property spivs, expect people to borrow to spend. Excellent way to run a rentier economy.

---------- Post added at 15:01 ---------- Previous post was at 14:49 ----------

Wonder what the Bank of England will think of this? They have been trying to calm borrowing, at least in the mortgage market, down. Their usual response to too much credit in the economy would be to raise interest rates however with so much borrowing and so many mortgaged to the hilt that would be potentially disastrous.

Raising interest rates would also of course slow growth and reduce the already very low inflation.

As inflation is so low debt, both public and private, is doubly bad as it can't be inflated away. The very high interest rates and inflation of the past were horrendous shocks but quickly inflated away debt by reducing its value relative to wages.

No such option now. The only way to raise inflation that I can think of would be to perform a QE operation and push money into the real economy rather than buying government debt from banks who then sit on the cash and use it for cheap (actually they got paid to take it) recapitalisation.

05-12-2014, 16:01	#2
Ignitionnet Inactive Join Date: Jun 2008 Location: Leeds, West Yorkshire Age: 47 Posts: 13,995	Re: What George Osborne isn't telling you, and doesn't want you to know. Nothing new. His original deficit reduction plan involved an expansion of private debt too. EDIT: Oh look, big expansion in mortgage debt thanks to a nice fat increase in house prices. Keep wages down, feed the property spivs, expect people to borrow to spend. Excellent way to run a rentier economy. ---------- Post added at 15:01 ---------- Previous post was at 14:49 ---------- Wonder what the Bank of England will think of this? They have been trying to calm borrowing, at least in the mortgage market, down. Their usual response to too much credit in the economy would be to raise interest rates however with so much borrowing and so many mortgaged to the hilt that would be potentially disastrous. Raising interest rates would also of course slow growth and reduce the already very low inflation. As inflation is so low debt, both public and private, is doubly bad as it can't be inflated away. The very high interest rates and inflation of the past were horrendous shocks but quickly inflated away debt by reducing its value relative to wages. No such option now. The only way to raise inflation that I can think of would be to perform a QE operation and push money into the real economy rather than buying government debt from banks who then sit on the cash and use it for cheap (actually they got paid to take it) recapitalisation.