The great interest rate rip off part 1

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See the end of the thread for latest views/news.

Also see here;

 

http://www.consumeractiongroup.co.uk/forum/showthread.php?288237-The-great-interest-rate-ripp-off-part-2

 

I have a simple question, why should any increase in the cost of borrowing go to the banking sector bottom line, rather than paying off the debt owed? Why is it in the economic interest of the country for the money to go to the banking system rather than reducing the level of personal debt?

 

I am seeking help in mounting a legal challenge over the legality of using interest rates to control inflation, primarily my objection is that currently the consumer see’s no benefit in any increase in the cost of borrowing I argue this increased cost should be coming off the debt owed by the individual and not funding the bottom line of the banking sector.

 

I want to challenge the Bank of England in court over the use of interest rates to control inflation, there is no justification in law, economically or morally to simply make borrowing more expensive to control inflation. Therefore the BoE is acting illegally by allowing the banking system to simply take our hard earned money cash to fund the bottom line

 

£100,000 @ 3.5% APR = £3500 a year in interest July 10 2003

£100,000 @ 5.25% APR = £5250 a year in interest Jan 2007

 

So far over the past 4 years there has been an inflation busting 50% rise in the cost of borrowing under the guise of controlling inflation. If the interest rate goes to 5.75% as many economists expect this means an inflation busting 65% raise in the cost of borrowing. This would mean for every £100,000 owed approx £5750 will be taken in interest with none of this money going to the debt owed. The banking system is raking in an extra £1750 a year of our money for doing nothing.

 

Surely if interest rates control inflation a 50% rise over 4 years would have controlled the problem, unless of course they don’t!

1. Interest rates are only fuelling banking sector profits
   
2. Interest rates don’t control inflation
   
3. Increased repayments should go to reducing personal debt levels not banks profits
   
4. Personal lending limits should be set
   
5. Maximum mortgage multiples should be set
   
6. Interest rates don’t combat raising oil prices, energy prices etc...
   
7. Interest rates don’t combat inflation caused by tax raises
   

If you start digging deeper you find that it’s the banking sector helping to fuel inflation by recklessly lending money. The current system does not penalise the banks for reckless lending, if they lend out too much money and cause inflation they are rewarded with higher interest rates which we pay for! It’s the consumer paying for poor banking decisions over lending. The only way banks can increase profits is by lending more money, this is a vicious circle and it’s the consumer who pays the price with inflation and higher borrowing costs.

 

Inflation isn’t helped by the pressures of the stock market, energy prices, tax raises etc… yet our governor of the Bank of England remains silent, just blames the consumer and makes them pay.

 

I’ve already contacted the Bank of England and so far they haven’t given me any economic evidence why it’s in the economic interest of the country for the increases in the cost of borrowing to go towards the bottom line rather than paying off debt.

 

If anyone here can give me the economic argument for this I look forward to reading it.

 

Please note I have tried to keep this simple and brief, inflation is a complex issue but it’s cannot be control simply by increasing the cost of borrowing and ensuring the consumer pays for it 100% which the current system does.

 

However I know there isn’t one and I want my overpayments to the bank back AND TAKEN OFF WHAT I OWE ON MY MORTGAGE.

 

http://petitions.pm.gov.uk/mortgages/ - Deadline to sign up by: 20 May 2007

 

There currently is a petition here please sign and protest, this petition has not been created by me but I’ve already signed it.

 

If anyone can help please get in touch, no central bank has ever been taken to court, it's time they where and asked to justify what they are doing. If your fed up help spread the word and join the fight.

Edited December 28, 2010 by MARTIN3030

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BBC NEWS | Business | Interest rates 'must hit 5.75%'

 

The Bank of England should raise interest rates to 5.75% by June in order to guard against wage-driven inflation, a think tank has warned.

 

While rates are expected to go up from 5.25% to 5.5% next month, the National Institute for Economic and Social Research says a bigger rise is needed.

It points to the fact that the UK's retail price inflation (RPI) rate is currently at a 16-year high of 4.8%.

RPI is the basis for many annual pay deals agreed at this time of the year.

 

Not that people are fighting for higher wages to meet the higher mortgage repayments then!!!!

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BBC NEWS | Business | Bank sees 'sharp' inflation drop

 

Bank sees 'sharp' inflation drop

 

Bank of England Governor Mervyn King said that there could be a "sharp" decline in the UK's rate of inflation over the next four to six months.

 

Giving testimony to parliament, Mr King said the Bank was determined to bring inflation back within its 2% target.

The Bank also said that the strength of the UK housing market over the past year was a "significant" development.

The comments come as many analysts are predicting that interest rates will increase in May to slow price growth.

 

Bank pledges better rate guidance

 

The Bank of England will aim in future to give financial markets a better insight into its economic thinking.

 

The pledge comes amid rising pressure on the central bank, as it marks 10 years of setting the UK's monetary policy independent of the government.

Last month, the Bank was forced to write an unprecedented letter to the Chancellor explaining why inflation had risen by 1% over its target.

Analysts expect rates to be raised to 5.5% at the next meeting on 10 May.

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King sees money growth as danger sign-Business-Economics-TimesOnline

 

Rapid growth in the supply of money and credit in the economy may be a warning signal of inflationary risks, Mervyn King, the Bank of England Governor, conceded last night, in comments that will harden expectations of new interest-rate increases.

 

After an attack on the Bank last month from economists who accused its Monetary Policy Committee (MPC) of paying too little heed to the role of money growth in the recent surge in inflation, Mr King admitted that these factors could signal that base rates had been at the wrong level.

 

 

“It is quite possible for there to be unwarranted money supply shocks . . . The MPC must always be looking for warning signals of this,” he said. “There are times where monetary developments have . . . [proved] a warning sign of inflationary risks.”

 

 

The Governor’s comments, to the Society of Business Economists, came as he defended the MPC’s record amid a recent outbreak of criticism since inflation climbed to a ten-year high of 3.1 per cent, forcing him for the first time to write an explanatory letter to the Chancellor.

Well done Mervyn, the banks are lending out too much money increasing inflationary pressures and quite rightly the consumer should pay, as giving them even more profit will teach them not to be so reckless. Lets tax the poorest even more and give the money to the rich.

 

For £250,000 a year, your worth every penny Mervyn.

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BBC NEWS | Business | UK interest rates raised to 5.5%

 

The Bank of England has voted to raise interest rates by a quarter of a percentage point to 5.5%.

 

The increase, the first since February, takes the cost of borrowing to its highest level since 2001.

Analysts had widely expected the rise as the bank battles to rein in inflation and cool consumer spending.

Business and employers groups accepted that the latest rise was "necessary", but added caution was needed in future so as not to slow UK growth too much.

"The MPC (Monetary Policy Committee) has to be firm. But it is important not to overreact to transitory developments," the British Chambers of Commerce said.

 

Yet more money taken from the poor to give to the rich, this stealth tax needs stopping. Why not simply order wage reductions across the board this would have exactly the same effect.

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Why does it have holes in it????

 

What exactly am I getting for the extra £2000 I'm now having to give to the banks????

 

What difference would it make to simply have a £2000 wage reduction from my salary???

 

That would reduce costs, leading to lower prices therefore lowering inflation???

 

If you can say the above is a simplistic argument then so is using interest rates to control inflation.

 

Inflation is being caused by the over supply of money which encourages higher prices leading to inflation. The root cause of this is the banks and they are rewarded with high interest rates encouraging them to further lend money. Granted at some point the cost of borrowing will be too prohibitive the main problem being many people have lent large sums against the promise of long term stability which the BoE is charged with and people are now facing the very real prospect of losing there home because of the stupid notion that interest rates control inflation.

 

If my argument is so full of holes then you can answer the one very simply question:

 

Why is it in the economic interest of the country for any increase in the cost of borrowing to go towards the banking sector bottom line, be it the banks themselves or the money markers rather than the increase coming off the debt owed by the individual???

Or do you deny that somebody somewhere is making huge sums of money out of these increases?

It's a very simply question yet the Bank of England have failed to answer it so far. Everyone I've asked so far has failed to provide anything like a reasonable response.

 

I presume you have economic modelling data which can verify and has been published that money is better going to the bottom line rather than off the debt.

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Once more still no answer to the question of why any increase in the cost of borrowing should go to banking sector bottom line (please note that I mean the entire banking system, money markets not just the high street banks) rather than paying off the debt.

 

If I've borrowed too much money I should be paying it back not having a higher cost of borrowing, which lets face it is a pretty stupid state of affairs and achieves very little apart from improving city profits. Yes it costs the bank more, but are you really trying to say they don't take a cut of any increase???

 

It's a loaded question is it??? I'm afraid not it's a very simple question surely it can be answered if it's loaded or not, and I'm afraid that's the system.

 

Do interest rates work, yes in the sense if you put them up high enough you kill the economy. Why not simply put interest rates up to 15% again that will sort out inflation.

 

You have too much trust in the establishment, just because this has been written thousands of times that the way to control inflation is with interest rate raises doesn't mean it's the best way.

 

Increasing taxes would reduce inflation as would a decrease in wages.

 

You make a great point about people with loans etc... paying the price with wage cuts, but you fail to make the next logical step that is inflation is a micro economic problem and NOT A macro economic one. Why am I paying for the idiots down London who've driven up house prices??? What your really saying is that interest rates should be set regionally, but this brings you back to do interest rates work??? Also what about the people without loans driving inflation up as they have spare cash!!!! How do you fix that with interest rates???

 

Perhaps you can answer what possible association there is between oil price and interest rates???? The recent inflation pressure can be said to be caused by energy prices, the great the Mervyn the dim offered this as the excuse to the chancellor which was a clear admission that interest rates don't work. Yet I'm paying the price for something that's way out of national control.

 

Again in your reply you've completely failed to say what possible there is to me as individual to paying more for borrowing money.

 

Perhaps when thousands off families are homeless you'll be happy.

 

I'm not making assumptions, inflation is a complex problem and can't be covered in a few sentences.

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So you still can't give a answer???

 

The great depression of the 1930s interest rates didn't fix nor stop it.

 

The inflation and oil economic pressures of the 1970's didn't get stopped or prevented by the great minds of the industrialised countries.

 

You also mean the great minds who decided to gerrymander with the housing market to get votes in the 80's by not allowing councils to rebuild new housing stock when they had to sell to renters causing the present house price inflation.

 

You also mean the great minds that spent billions trying beat the markets to prevent ERM expulsion and that put interest rates up from 10% to 15% in one day but then only put them back to 12% (note not 10%).

 

I would suggest you get a history book and have a look at what the great minds of the industrialised economies have achieved you will see that it's just boom/bust boom/bust hardly a great sign that interest rates work or are even effective. If interest rates where the holy grail of economics you would not get such vicious cycles.

 

Or perhaps I should just be like you and accept the status quo and never question just accept what the great minds are telling us and keep handing over my hard earned cash.

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As I never started it's impossible for me to stop.

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BBC NEWS | Business | Inflation 'pushing up pay deals'

 

The number of UK pay deals above 4% is picking up as level of inflation rises, according to a report from Income Data Services (IDS). The median average pay deal held steady at 3.5% in the three months to April, the IDS survey found.

But the number of deals above 4% rose to more than a third, as against a quarter in the previous three months.

News of higher pay settlements may trigger further fears about inflationary pressures in the economy.

 

 

On Thursday, the Bank of England raised UK interest rates to 5.5% - the highest level in six years - in an effort to bring inflation under control.

 

Well done Mervyn, your increases to the cost of living via interest rate rises has merely created wage inflation. I'd quickly suggest putting up interest rates again as that will tackle the rising cost of living and stamp out this dammed inflation problem.

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As where all paying now roughly £2000 per £100,000 borrowed for lower inflation are we getting good value for money???

 

For £2000 I expect results and as consumers where not getting them, all what we can seem to expect is to get charged even more for the politicians and banking sector failings to control inflation and inept management.

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Higher interest rates expected to widen house price divide-Life & Style-Property-TimesOnline

 

The latest rise in interest rates is likely to accentuate the divide between house prices outside the capital and those in the most sought-after of London postcodes.

 

The haves (people who are merely rich) and the have-yachts (people who are rich beyond the dreams of avarice) are forecast to continue to drive up prices in Central London, the world’s most expensive residential zone, for the rest of the year.

 

 

Growth in Central London could be as high as 20 per cent this year, but elsewhere prices may falter as rate rises begin to bite. Only properties right at the top end of the market will retain their value, according to Yolande Barnes, of Savills, who said that the direction of the market was now all about which rung of the ladder you are on.

 

 

The seven-figure country house sector remains immune to more expensive borrowing as those who have already acquired a mansion in Mayfair or Belgravia still want their grand rural retreat.

 

 

Michael Fiddes, of Strutt & Parker, said: “There is an imbalance between the supply and demand, so buyers are still paying a premium for the right property.”

 

 

Outside the metropolis and country estate hotspots, however, the market’s temperature had already begun to cool before the base rate went up from 5.25 per cent to 5.50 per cent this week. A scarcity of property for sale and strong demand had been the driving forces behind the 10 per cent nationwide average price increase over the past 12 months, but demand was already slackening under affordability pressures. Larger mortgage bills are expected to test the market further.

 

It's good to know that the recent interest rate rises is curbing the spending of the super rich, well done Mervyn your on the ball as usual.

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BBC NEWS | Business | Eurozone rates on hold at 3.75%

 

The European Central Bank (ECB) has maintained its benchmark interest rate on hold at 3.75%, as expected.

 

But many analysts think the European Central Bank will raise rates as early as June, to keep inflation in check.

The widely-expected move comes after the Bank of England announced that it would increase rates to 5.5%, the highest level in six years.

A day earlier, the US opted to keep its interest rate at 5.25%, amid fears over the cooling housing market.

The last time the ECB raised rates was in March, when it was increased by a quarter of a percentage point from 3.5%.

 

 

Interesting that we are in a single market yet we are denied lending at the ECB rate.

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All what the BoE said in a previous response was that it got split between savers and the Banks (although not mentioned they probably also meant the money markets).

 

However they still failed to answer the question of why it's in the economic interest of the country and more beneficial for any increase in the cost of borrowing to do this rather than pay off the debt.

 

I still can't see why this is a loaded question. In science if the theory is good it can cope with any question of attempt to undermine the theory. If the current theory can't deal with a legitimate question then the theory falls.

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Which do you object to?

 

Clearly the current thinking is that rising the cost of borrowing via interest rates is of economic benefit?

 

Would you prefer an open ended question of which gives the greater economic benefit to the country when an increase in the cost of borrowing occurs should it clear the individuals/companies debt, go to profit, go to the savers, disappear into a great big black hole or pay for the war in Iraq or any other country that isn't flavour of the month??

 

Who profits from higher interest rates? - Answer Desk - MSNBC.com

 

It’s that difference between long and short rates that makes the world go around for lenders. Banks traditionally make money by borrowing short-term money — from depositors (you and me), from other banks or from the Fed — and then lending it out at a higher rate to customers who borrow for the long haul. So their profit comes from the (usually) higher rates they charge borrowers compared to the bank’s lower cost of money.

 

That gap between short and long rates is stretching and shrinking all the time. You may have heard it referred to as the “yield curve” — which is often measured by the difference between the market rate on a 10-year Treasury bond and a 3-month T-bill. When that gap is big, the curve said to be is “steep;” when it’s small or non-existent the curve is “flat.” Occasionally, long rates fall lower than short rates; the yield curve is then said to be “inverted.” (At this point Wall Street usually freaks out because this often, but not always, means a recession is coming.)

 

 

 

Even this fails to give any sort of decent answer.

 

 

I know your not liking any of my comments but where has the £2000 extra in interest gone, surely in basic terms it's to buy low inflation otherwise what's the point??

 

Why didn't interest rate rises effect the oil price which was fueling inflation?

 

Why hasn't the rise in interest rates caused more houses to be built? The lack of housing is helping to fuel inflation in the housing sector, yet the logic of how interest rates combats a shortage problem is really beyond me.

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Thought I'd better make at least one post you couldn't object to:lol:

 

InfoWorld - Information Technology News, Computer Networking & Security

 

Windows XP systems are still locking up during patch update attempts -- even after users deployed the fix suggested by Microsoft.

 

Symptoms of the long-running problem -- which the Windows Server Update Services (WSUS) team dubbed the "svchost/msi issue" -- include 100 percent CPU usage by svchost.exe and its multiple processes during Automatic Updates scanning, update downloads, and sometimes even if AU is simply enabled on a machine.

 

"Of course, the computer is virtually unusable" when that happens, said a user identified as Foxy-Perth on the Windows Update support forum.

 

Every month at patch time, Microsoft's support boards fill with complaints from users. It was no different this week. "I have 6 (and counting) computers having issues with SVCHOST process running at near 100 percent CPU utilization," said TKovacs on Wednesday, one day after Microsoft unveiled seven security updates. "Disabling Automatic Updates resolves the issue. [What] did Microsoft just release?"

 

Download the hotfix

 

The new client and the WSUS update to version 3.0 will be available to WSUS on May 22. Like the hotfix, the client can also be downloaded manually and installed now. Instructions and a link to the download have been posted to the MSDN (Microsoft Developers Network) site.

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House prices keep on rising despite higher interest rates-Business-Industry Sectors-Construction & Property-TimesOnline

 

The pace of house price inflation picked up last month, despite a string of signals that the market should be slowing, chartered surveyors report today, in the latest surprisingly strong result for the sector. Property prices accelerated for the second month in a row in April. There were higher prices in every region, even though supply rose and demand appeared to fall, according to the Royal Institution of Chartered Surveyors (RICS).

 

 

Its headline net balance of surveyors reporting higher prices rose to 28.9 from 26.9. It was the eighteenth month in a row that the balance has been greater than zero, implying rising prices.

 

 

The pickup came despite a slight decline in the number of new buyer inquiries after the Bank of England’s series of interest rate rises. Rates have risen from 4.5 per cent to 5.5 per cent in only ten months.

 

Quick Mervyn you'd better put interest rates up again as they are quickly damping house price inflation, it's just such a good job there's such a strong link between interest rates and inflation???

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City expects Bank to raise rates again in spite of inflation fall-Business-Industry Sectors-Banking & Finance-TimesOnline

 

The first fall in inflation for six months has failed to dispel City fears that the Bank of England may indicate today that interest rates need to rise higher still.

 

As the Bank put the finishing touches to its quarterly Inflation Report, to be published this morning, official data showed yesterday that inflation has begun to fall from last month’s 15-year peak.

 

 

On the consumer price index (CPI), the Bank’s target measure, inflation dipped to 2.8 per cent in April, compared with a figure of 3.1 per cent the month before.

 

 

However, after the Bank’s statement last week that risks to inflation remain, many analysts gave warning that at least one more interest-rate rise probably would be needed to bring price expectations firmly under control.

 

 

April’s fall in inflation was driven by a long-awaited decline in gas and utility bills. Inflation is expected to continue to fall throughout the summer months as the effect of fuel bill rises last year drops out of the annual calculation.

 

Nothing to do with interest rates raises then the current drop in inflation rate!!! Very strange good job interest rates 100% affect inflation. Please take some more money off me so we can get this dammed inflation problem under control.

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Bank of England warns of further rates hike | the Daily Mail

 

Borrowers look set to face another rise in interest rates if inflation is to hit the Government's 2% target, the Bank of England suggested today. A key quarterly inflation report from the Bank indicated that interest rates may need to rise by another quarter point to 5.75% for inflation to be kept under control.

 

 

The Bank predicted that the Consumer Prices Index (CPI) - the official measure of inflation - would narrowly miss the 2% target if rates were kept at 5.5%.

 

 

The forecast will be bad news for homeowners who have already seen four interest rate rises since last August, hit by another quarter point rise earlier this month.

 

 

CPI hit 3.1% in March - its highest level since records began 10 years ago, forcing the Bank's Governor to write an unprecedented letter of explanation to the Chancellor.

 

 

Yesterday's inflation figures from the Office for National Statistics revealed a sharp drop to 2.8% in April.

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Bank talks tough on inflation | | Guardian Unlimited Business

 

Interest rates may need to head higher in the next few months if inflation is to come down to target in two years, the Bank of England said today.The central bank's Inflation Report revealed that interest rates are likely to rise one more time in the near future if inflation is to hit the Bank's 2% long-term target.

The quarterly publication, which comes a week after the Bank's Monetary Policy Committee raised interest rates by a quarter-point to 5.5% - the fourth hike since August, said medium-term inflation risks were still on the upside.

 

...............

 

 

Meanwhile figures today showed that earnings growth - an area that policymakers have been concerned may fuel inflation - has been muted.

But Bank of England governor, Mervyn King, said that inflation pressures still remain in the economy, and that the danger has not passed on wage deals.

"The main risks to CPI stem from inflation expectations, energy and import prices and spare capacity," he said. "The MPC will take whatever further action needed to bring CPI to target."

 

 

The recent data has shown continued strength of core inflation. Cuts in the price of clothing and footwear slowed and food prices rose at a hefty annual rate of 6% last month, the sharpest rise for nearly six years.

A key fear for the MPC is that prices rise on the high street as retailers attempt to rebuild profit margins from high energy costs by passing them onto their customers.

"Indicators of pricing pressure are particularly important at the moment," said Mr King.

 

 

 

Surely if the bank has the consumer interest at heart over prices than companies who are exploiting consumers should pay the price (for example higher taxes on profits) and not the consumer with higher interest rates???

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http://www.thestar.co.uk/business?articleid=2880731

 

ANTI-inflation interest rate policies, widely credited with fuelling Britain's economic success, have come under attack from a leading South Yorkshire industrialist.

 

 

Future Master Cutler Gordon Bridge told business leaders and financiers from the UK and abroad, gathered in Sheffield for the 371st Cutlers' Feast: "We, in the UK, have an obsession with controlling inflation.

 

"I acknowledge many say 'Rightly so.' As a manufacturer and exporter, I say, what use is it if we eliminate inflation and, in the process, eliminate large parts of our manufacturing and producing industries?"

Mr Bridge, chief executive of world-beating Rotherham mechanical seal manufacturer, AESSEAL, and Cutlers' Company Senior Warden, launched his attack in a detailed critique of the impact of Government policies.

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Bank says another rate rise needed -Business-Economics-TimesOnline

 

The Bank of England made clear today that another interest rate rise looked very likely despite yesterday’s drop in headline inflation.

Presenting the Bank’s quarterly Inflation Report, Mervyn King, the Bank’s Governor, said that the main risks that could force rates to rise again came from higher inflation expectations and businesses becoming increasingly confident of their ability to raise prices.

The report showed that inflation would stay on track in two years’ time only if market expectations of another rate rise this summer are fulfilled by the Bank’s Monetary Policy Committee.

However, he said, “the main downside risk is that there could be more slack in the labour market which would slow pay growth further.”

Data published separately today suggested that the labour market was becoming looser. Unemployment climbed by 13,000 over the three months to March to hit 1.7 million, according to the Office for National Statistics’s survey-based measure.

The ONS added that headline average earnings growth fell in March to 4.5 per cent from 4.6 per cent the previous month.

Mr King said that inflation would fall this summer as gas and electricity bills fall compared to last year’s rises.

But the “crucial question” for monetary policy was where inflation was likely to be once energy prices have settled down, he said.

 

 

 

I think it's more like Dead cat theory, a dead cat thrown from a great height will bounce but it will still be dead. If you rise interest rates high enough you will kill inflation but that doesn't mean that interest rates are efficient and robust enough to control inflation.

 

If the BoE employed enough muggers you could reduce the supply of money and have the same effect.

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I have a simple question, why should any increase in the cost of borrowing go to the banking sector bottom line, rather than paying off the debt owed? Why is it in the economic interest of the country for the money to go to the banking system rather than reducing the level of personal debt?

 

Is this question loaded?

 

It depends on how you dissemble and read the question.

 

I have a simple question:

This depends on how one wish’s to interpret the question, if you wish to take a literal view then the question may not be simple although for an economist the following propositions may be easy to dispel and challenge so indeed it may be a simple question.

 

2nd part

 

Why should any increase in the cost of borrowing go to the banking sector bottom line, rather than paying off the debt owed?

 

A example of who to respond would be:

 

Any increase in the cost of borrowing does not improve or benefit the banking sector bottom line (profits) 100% of the increase in the cost of borrowing goes directly to the saver in the bank etc….. Therefore allowing it to pay off the debt could raise difficulties in generating new savings.

 

Or the increase in the cost of borrowing goes directly to the treasury and helps to pay for the war in Iraq, therefore the assumption that the money goes to the banking sector bottom line is incorrect. I shall address the question should the money pay off the debt within my answer to the second part of the question.

 

3rd part

 

The reason why it is in the economic interest for the money to go into the banking system rather than clearing personal debt is that……

 

The assumption that the money from an increase in interest rates goes into the banking system is indeed a fallacy as it goes to buy me hundreds of bottles of lager for me to drink myself stupid with…….

 

It seems that I can address the question without too much trouble even if it is loaded and full of presuppositions.

 

If you so wished you could address it by:

 

The presupposition that interest rates have any effect on inflation is false, it doesn't matter where the money goes to pay off the debt, increasing the bonus of banking execs, giving all the money to savers it will still fail to address the under lying causes of inflation...... Until you tackle these then a interest rate only policy of controlling inflation is doomed to failure........

 

Would the following make it any easier?

 

If the increases in interest rates where used to repay the debt owed rather than the current status quo, would greater economic advantage be gained?

 

My original question was phrased because I’m miffed, I’m paying the BoE or whoever £2000 extra a year for low inflation, that isn’t happening.

 

If I buy a product and it doesn’t work I expect my money back/a replacement etc… Yet when the BoE fails to do it’s job it’s only response is sorry we need more money it’s not working yet. Sorry still not working can we have some more of your money, oops it’s still not working can we have more of your money.

 

There isn’t any product that anybody buys where you suddenly start getting charged more after you’ve bought it. I don’t buy a car and 2 years down the line get a letter from the manufacturer stating that the cost has gone up and now I owe them a extra £400 etc….

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Shining a light on the true cost of our ‘free’ banking-Business-Columnists-TimesOnline

 

Andrew Tyrie, the backbench Tory MP who has been a perpetual thorn in the side of the Government over the cash-for-honours affair, has a new target: banks. In a paper for the Centre for Policy Studies today, he proposes that the banks should be compelled to provide every account-holder with an itemised statement showing all charges, both explicit and hidden. Crucially, that would include a figure for the interest forgone on current account balances, defined as the difference between the actual interest paid (0.1 per cent for most people) and base rate (5.5 per cent and rising).

It would also include the cost of any “excess” interest paid on loans, mortgages and overdrafts, defined by Mr Tyrie as any charge over and above base rate. Hidden charges levied through, for instance, foreign exchange translations would also be calculated and spelt out.

Customers would for the first time discover what they really pay for their banking services, says Mr Tyrie, who was an adviser to chancellors Lawson and Major. The increased transparency would give account-holders a much clearer idea of how much they were really paying for individual services, while shining light on some of the more weaselly terms and conditions. It would also enable customers to shop around more easily and make valid price comparisons.

Mr Tyrie does not do the sums, but a typical household could easily be paying bank charges, by his definition, of £500 to £1,000 a year or more. That will shock those who mistakenly believe they enjoy free banking in Britain.

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BBC NEWS | Business | Zimbabwe inflation up at 3,713%

 

Zimbabwe's rate of inflation surged to 3,731.9%, driven by higher energy and food costs, and amplified by a drop in its currency, official figures show. April's inflation rate jumped up from the 2,200% recorded last month, the Central Statistical Office (CSO) said.

The announcement came after Zimbabwe's government created a commission charged with finding a way to curb the country's spiralling cost of living.

There is high unemployment, and fuel and food shortages across the nation.

 

Strange how this wouldn't actually be sorted by increasing the interest rate!!!!