Anyway, interest rate cuts, is it the right thing to do?
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fat_boy wrote:
So, over to oil. My god, sub 50 a barrel, and four months back pundits were talking of 200 a barrel. How wrong can they be. And what explains the drop in proce? Can demand, and supply really drive price swings like this?
Yes, though some of this was undoubtedly futures trading. Although that in and of itself wasn't a bad thing, without a global economic meltdown there would have been a shortage of the black stuff, and that was being priced in by cany traders. $150 a barrel though was looking awfully like a bubble. A prolonged period of sub $70 oil is not going to be good in the long run. No incentive to invest in infrastructure that was already creaking at the seams. It could easily shoot back up in a couple of years time. It's important also to remember that oil is extremely inelastic as it can't be substituted easily, if at all. Small changes in supply and demand have great effects on price.
Bar fomos edo pariyart gedeem, agreo eo dranem abal edyero eyrem kalm kareore
MidwestLimey wrote:
It could easily shoot back up in a couple of years time.
Just as soon as the economy recovers again. One of the big drivers was that we'd exhausted cheap supplies and the marginal production cost of the only sources that could be brought on quickly (tar sands) were in the $60-100/barrel price. Once demand recovers (and it will rapidly: Projected growth from india/china/middle east/latin america over the next two decades is about 10%
ten timesthe projected decline in consumption from fully industrialized countries due to increased efficiency. (source The Economist, sometime in the last month or two) Edit: Fixed ratiomodified on Tuesday, December 9, 2008 2:49 PM
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Spending your way out of the current recession by reducing interests rates, lowering VAT rates, increasing Government borrowing and so on is the preferred tools of choice. Whether it will work or not is a different question altogether. But what concerns me is the huge hike in taxation of a variety of sorts that will be necessary for Government to balance its books. Regarding oil, if users and consumers are not buying as much as they once did, prices could go up by oil producing nations wishing to protect their incomes. However, that risks users and consumers tightening their belts even more. This would cause countries like Venezuela to potentially go bankrupt or cause major civil disobediences. But, if you reduce the price, it has a potentially benefit that users and consumers will continue to purchase the stuff and in terms of manufacturers, they will benefit particularly as this is a means to enable a recessionary process to be shorter lived than would otherwise be the case.
Richard A. Abbott wrote:
Government to balance its books
:laugh: :laugh: :laugh:
Sovereign ingredient for a happy marriage: Pay cash or do without. Interest charges not only eat up a household budget; awareness of debt eats up domestic felicity. --Lazarus Long
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Spending your way out of the current recession by reducing interests rates, lowering VAT rates, increasing Government borrowing and so on is the preferred tools of choice. Whether it will work or not is a different question altogether. But what concerns me is the huge hike in taxation of a variety of sorts that will be necessary for Government to balance its books. Regarding oil, if users and consumers are not buying as much as they once did, prices could go up by oil producing nations wishing to protect their incomes. However, that risks users and consumers tightening their belts even more. This would cause countries like Venezuela to potentially go bankrupt or cause major civil disobediences. But, if you reduce the price, it has a potentially benefit that users and consumers will continue to purchase the stuff and in terms of manufacturers, they will benefit particularly as this is a means to enable a recessionary process to be shorter lived than would otherwise be the case.
Richard A. Abbott wrote:
But what concerns me is the huge hike in taxation of a variety of sorts that will be necessary for Government to balance its books.
Won't happen, in the U.S. at least. We'll just sell more bonds to China and let our kids worry about it. Christmas is when the kids get what they want and the parents pay for it. Bailout is when the parents get what they want and they kids pay for it.
Jon Smith & Wesson: The original point and click interface
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While interest rate cuts put more money in the pockets of those in debt, it takes money out of the pockets of those who save. And, is it not also the case that the lower the interest rate, the less money banks make, hence their reluctance to pass on rate cuts to joe public. So, are rate cuts the right hting to do right now? I guess it comes down to the propoprtion of savers/borrowers in that country, so while they might work for the UK and US, in Europe, where people do save and lending is restricted, I think rate cuts will actually reduce spedning power. Perhaps this is why the Sterling rate is now lower that the Euro rate. Its a first, thats for sure. So, over to oil. My god, sub 50 a barrel, and four months back pundits were talking of 200 a barrel. How wrong can they be. And what explains the drop in proce? Can demand, and supply really drive price swings like this? I know in the UK when prices were high demand actually dropped. So is oil just tagged to some perceived future value based on some pundits musings?
Morality is indistinguishable from social proscription
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MidwestLimey wrote:
It could easily shoot back up in a couple of years time.
Just as soon as the economy recovers again. One of the big drivers was that we'd exhausted cheap supplies and the marginal production cost of the only sources that could be brought on quickly (tar sands) were in the $60-100/barrel price. Once demand recovers (and it will rapidly: Projected growth from india/china/middle east/latin america over the next two decades is about 10%
ten timesthe projected decline in consumption from fully industrialized countries due to increased efficiency. (source The Economist, sometime in the last month or two) Edit: Fixed ratiomodified on Tuesday, December 9, 2008 2:49 PM
dan neely wrote:
Once demand recovers (and it will rapidly: Projected growth from india/china/middle east/latin america over the next two decades is about 10% the projected decline in consumption from fully industrialized countries due to increased efficiency. (source The Economist, sometime in the last month or two) Quote Selected Text
That sounds backwards - if increase in demand from China, India etc.is only 10% of projected decline in US, Europe etc. then there would be a net decline in demand, which would further decrease prices. Perhaps you meant that the decline in demand from US & Europe would only be 10% of the rise in demand in the other places...
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fat_boy wrote:
While interest rate cuts put more money in the pockets of those in debt, it takes money out of the pockets of those who save.
A better solution if you want to help the most who badly need help.
-Suhredayan
suhredayan wrote:
A better solution if you want to help the most who badly need help.
only better if you believe in rewarding those who borrowed more than they can pay at the expense of more prudent folk...and thus encouraging future stupidity.
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suhredayan wrote:
A better solution if you want to help the most who badly need help.
only better if you believe in rewarding those who borrowed more than they can pay at the expense of more prudent folk...and thus encouraging future stupidity.
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Richard A. Abbott wrote:
But what concerns me is the huge hike in taxation of a variety of sorts that will be necessary for Government to balance its books.
Won't happen, in the U.S. at least. We'll just sell more bonds to China and let our kids worry about it. Christmas is when the kids get what they want and the parents pay for it. Bailout is when the parents get what they want and they kids pay for it.
Jon Smith & Wesson: The original point and click interface
Oakman wrote:
We'll just sell more bonds to China
They have enough problems with existing, do you really think they are stupid enough to permit this to continue. Better bet might be the Saudi's, they are cash rich and perhaps looking to invest their wealth, after all, the oil ain't going to last a great deal longer (few decades presumably) and they have expensive tastes and need to protect an uncertain oil-free future. Anyhow, balancing the books, an ironic joke. :laugh:
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dan neely wrote:
Once demand recovers (and it will rapidly: Projected growth from india/china/middle east/latin america over the next two decades is about 10% the projected decline in consumption from fully industrialized countries due to increased efficiency. (source The Economist, sometime in the last month or two) Quote Selected Text
That sounds backwards - if increase in demand from China, India etc.is only 10% of projected decline in US, Europe etc. then there would be a net decline in demand, which would further decrease prices. Perhaps you meant that the decline in demand from US & Europe would only be 10% of the rise in demand in the other places...
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While interest rate cuts put more money in the pockets of those in debt, it takes money out of the pockets of those who save. And, is it not also the case that the lower the interest rate, the less money banks make, hence their reluctance to pass on rate cuts to joe public. So, are rate cuts the right hting to do right now? I guess it comes down to the propoprtion of savers/borrowers in that country, so while they might work for the UK and US, in Europe, where people do save and lending is restricted, I think rate cuts will actually reduce spedning power. Perhaps this is why the Sterling rate is now lower that the Euro rate. Its a first, thats for sure. So, over to oil. My god, sub 50 a barrel, and four months back pundits were talking of 200 a barrel. How wrong can they be. And what explains the drop in proce? Can demand, and supply really drive price swings like this? I know in the UK when prices were high demand actually dropped. So is oil just tagged to some perceived future value based on some pundits musings?
Morality is indistinguishable from social proscription
fat_boy wrote:
So, over to oil. My god, sub 50 a barrel, and four months back pundits were talking of 200 a barrel. How wrong can they be. And what explains the drop in proce? Can demand, and supply really drive price swings like this?
I can't remember when demand and supply last drove the prices of oil. The culprit is futures trading.
Cheers, Vıkram.
Stand up to be seen. Speak up to be heard. Shut up to be appreciated.
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What is the point in helping those who wish to grow their money by doing nothing?
-Suhredayan
suhredayan wrote:
What is the point in helping those who wish to grow their money by doing nothing?
That may well be the most ignorant question I've seen in weeks. Those are the people that provide the capital that funds work that creates the jobs that make the whole economy grow. It shows incredible ignorance of how things work to suggest that their money is "doing nothing". Without savers, there is no money to be borrowed. Borrowers who can't repay drain away savings that should go to activities that produce goods and infrastructure. Help borrowers who were foolish enough to borrow beyond their means at the expense of punishing savers, and you soon will have no money available for borrowing.
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What is the point in helping those who wish to grow their money by doing nothing?
-Suhredayan
suhredayan wrote:
What is the point in helping those who wish to grow their money by doing nothing?
For those who 1-voted this, recall that there was a time not too long ago when it was seen as immoral to make money off of interest. Reason being, every single penny of that money comes from interest charged to people who usually can't pay it but have no choice but to do so. Classic usury. The issue is ALOT more complex than "stupid people who took out bigger loans than they could pay." While I have no sympathy for that behavior, I think it's more complex than that.
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suhredayan wrote:
What is the point in helping those who wish to grow their money by doing nothing?
That may well be the most ignorant question I've seen in weeks. Those are the people that provide the capital that funds work that creates the jobs that make the whole economy grow. It shows incredible ignorance of how things work to suggest that their money is "doing nothing". Without savers, there is no money to be borrowed. Borrowers who can't repay drain away savings that should go to activities that produce goods and infrastructure. Help borrowers who were foolish enough to borrow beyond their means at the expense of punishing savers, and you soon will have no money available for borrowing.
Rob Graham wrote:
Those are the people that provide the capital that funds work that creates the jobs that make the whole economy grow.
I disagree, it is the people who borrow money, is creating the jobs and making the economy grow.
Rob Graham wrote:
It shows incredible ignorance of how things work to suggest that their money is "doing nothing". Without savers, there is no money to be borrowed.
The savers money is not needed actually, Fed can print the bills and give it to the borrowers provided the economy is robust.
-Suhredayan
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suhredayan wrote:
What is the point in helping those who wish to grow their money by doing nothing?
That may well be the most ignorant question I've seen in weeks. Those are the people that provide the capital that funds work that creates the jobs that make the whole economy grow. It shows incredible ignorance of how things work to suggest that their money is "doing nothing". Without savers, there is no money to be borrowed. Borrowers who can't repay drain away savings that should go to activities that produce goods and infrastructure. Help borrowers who were foolish enough to borrow beyond their means at the expense of punishing savers, and you soon will have no money available for borrowing.
Rob Graham wrote:
Without savers, there is no money to be borrowed.
Errr Rob, I was with you until this part. In a credit economy, it is borrowing that provides money for.. more borrowing. Banks use the money owed as collateral against future loans - they're lending money they don't actually have. Financial regulations allow them to do this and control the percentage of real value versus virtual value that can be loaned. It's also why when the economy tanks, bank failures accelerate so quickly. It's also an incredibly unstable way to do business. I keep thinking there's a better way, but I can't come up with one that still provides enough capital for invention and innovation on the scale that we're used to...
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Rob Graham wrote:
Those are the people that provide the capital that funds work that creates the jobs that make the whole economy grow.
I disagree, it is the people who borrow money, is creating the jobs and making the economy grow.
Rob Graham wrote:
It shows incredible ignorance of how things work to suggest that their money is "doing nothing". Without savers, there is no money to be borrowed.
The savers money is not needed actually, Fed can print the bills and give it to the borrowers provided the economy is robust.
-Suhredayan
suhredayan wrote:
Fed can print the bills and give it to the borrowers provided the economy is robust.
Printing money is poison to the economy in the long run (and sometimes in the short run - how do you think Zimbabwe got to where it is today). Even in a robust economy, printing money causes inflation, which in turn makes the money worth less and less. You seem to believe that one can really get something for nothing. It's pretty clear that you haven't a clue when it comes to economics. people who borrow money beyond their means to repay got us in the financial crisis we are in today. That is why the Mortgage market collapsed, starting this whole chain of events leading to bank failures and general economic malaise.
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suhredayan wrote:
Fed can print the bills and give it to the borrowers provided the economy is robust.
Printing money is poison to the economy in the long run (and sometimes in the short run - how do you think Zimbabwe got to where it is today). Even in a robust economy, printing money causes inflation, which in turn makes the money worth less and less. You seem to believe that one can really get something for nothing. It's pretty clear that you haven't a clue when it comes to economics. people who borrow money beyond their means to repay got us in the financial crisis we are in today. That is why the Mortgage market collapsed, starting this whole chain of events leading to bank failures and general economic malaise.
Rob Graham wrote:
It's pretty clear that you haven't a clue when it comes to economics.
Don't be so quick on your judgement.
Rob Graham wrote:
people who borrow money beyond their means to repay got us in the financial crisis we are in today
My replies were with respect to interest rates and not on the current financial crisis.
Rob Graham wrote:
people who borrow money beyond their means to repay got us in the financial crisis we are in today. That is why the Mortgage market collapsed, starting this whole chain of events leading to bank failures and general economic malaise.
This has no relation with the interest rates. Since most of the leveraged positions were taken when the interest rates were at their peak. And not now when the interest rates are coming down. FYI: Leveraged positions caused the current financial crisis. [edit]
Rob Graham wrote:
Printing money is poison to the economy in the long run (and sometimes in the short run - how do you think Zimbabwe got to where it is today)
Fed is printing money every night nowadays, may be they are also not aware of your age old theory. [/edit]
-Suhredayan
modified on Tuesday, December 9, 2008 4:49 PM
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Rob Graham wrote:
Without savers, there is no money to be borrowed.
Errr Rob, I was with you until this part. In a credit economy, it is borrowing that provides money for.. more borrowing. Banks use the money owed as collateral against future loans - they're lending money they don't actually have. Financial regulations allow them to do this and control the percentage of real value versus virtual value that can be loaned. It's also why when the economy tanks, bank failures accelerate so quickly. It's also an incredibly unstable way to do business. I keep thinking there's a better way, but I can't come up with one that still provides enough capital for invention and innovation on the scale that we're used to...
Patrick Etc. wrote:
It's also an incredibly unstable way to do business. I keep thinking there's a better way, but I can't come up with one that still provides enough capital for invention and innovation on the scale that we're used to...
Maybe there isn't one. But that means, to me, that there's no way that "provides enough capital for invention and innovation on the scale that we're used to" because it has become obvious that letting the idiots in charge of our banks loan out at 40:1 earns a fail, a big one.
Jon Smith & Wesson: The original point and click interface
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Rob Graham wrote:
Without savers, there is no money to be borrowed.
Errr Rob, I was with you until this part. In a credit economy, it is borrowing that provides money for.. more borrowing. Banks use the money owed as collateral against future loans - they're lending money they don't actually have. Financial regulations allow them to do this and control the percentage of real value versus virtual value that can be loaned. It's also why when the economy tanks, bank failures accelerate so quickly. It's also an incredibly unstable way to do business. I keep thinking there's a better way, but I can't come up with one that still provides enough capital for invention and innovation on the scale that we're used to...
Without some savers, you are printing money out of thin air, which is the road Zimbabwe has gone down (Ten million dollar bill, andyone?).
Patrick Etc. wrote:
Banks use the money owed as collateral against future loans - they're lending money they don't actually have
No, they use funds on deposit as collateral against future loans. They are required to maintain a percentage of deposits on hand to satisfy customer demands for cash. The bank failures come from inability to meet depositor cash out demand. Banks can't use even collateralized loans as collateral, that would be a ponzi scheme (borrowing more so they can borrow more - I don't think so). Granted, they get a huge multiplier against the deposits on hand (more than 20 to 1 I think), but not against loans outstanding. They do bundle up the loans and sell them to others, thus getting funds they can use to make more loans (in that case they have 'recaptured' the original deposits lent out and then some. Basically they sell the loan for less than the total payback (principle plus anticipated interest over the life of the loan), but still for more than the original loan value (settling for a lower total profit in order to realize it sooner). Not at all the same as "borrowing against loans outstanding".
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suhredayan wrote:
What is the point in helping those who wish to grow their money by doing nothing?
For those who 1-voted this, recall that there was a time not too long ago when it was seen as immoral to make money off of interest. Reason being, every single penny of that money comes from interest charged to people who usually can't pay it but have no choice but to do so. Classic usury. The issue is ALOT more complex than "stupid people who took out bigger loans than they could pay." While I have no sympathy for that behavior, I think it's more complex than that.
Patrick Etc. wrote:
For those who 1-voted this, recall that there was a time not too long ago when it was seen as immoral to make money off of interest.
The Quran or Sharia still holds that this is the case. It was never so in the United States, nor as far as I am aware in any European country.
Patrick Etc. wrote:
Reason being, every single penny of that money comes from interest charged to people who usually can't pay it but have no choice but to do so. Classic usury.
No, classic usury occurs when the rate of interest is sufficiently high to garauntee that the loan will not likely be repayable, and that is still illegal in most places (upper limits on interest rates).
Patrick Etc. wrote:
The issue is ALOT more complex than "stupid people who took out bigger loans than they could pay."
Yes, it is, but that is not what the poster said, nor what was replied to him. He made a general assertion that it is better to help those who borrow than those who save, and reinforced that statement in subsequent posts. That broad assertion shows remarkable lack of knowledge of economics, as well as little thought about the "educational" effects of bailouts.
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Rob Graham wrote:
It's pretty clear that you haven't a clue when it comes to economics.
Don't be so quick on your judgement.
Rob Graham wrote:
people who borrow money beyond their means to repay got us in the financial crisis we are in today
My replies were with respect to interest rates and not on the current financial crisis.
Rob Graham wrote:
people who borrow money beyond their means to repay got us in the financial crisis we are in today. That is why the Mortgage market collapsed, starting this whole chain of events leading to bank failures and general economic malaise.
This has no relation with the interest rates. Since most of the leveraged positions were taken when the interest rates were at their peak. And not now when the interest rates are coming down. FYI: Leveraged positions caused the current financial crisis. [edit]
Rob Graham wrote:
Printing money is poison to the economy in the long run (and sometimes in the short run - how do you think Zimbabwe got to where it is today)
Fed is printing money every night nowadays, may be they are also not aware of your age old theory. [/edit]
-Suhredayan
modified on Tuesday, December 9, 2008 4:49 PM
suhredayan wrote:
FYI: Leveraged positions caused the current financial crisis.
No, the crisis started in November 2007 with the collapse of Countrywide Financial corp. A collapse caused by having made too many "subprime" (i.e. high risk of non payment) loans. The rest of the house of cards came down over the ensuing year due to the heavy investment in credit default swaps (basically insurance against these mortgage defaults) which was unregulated and lacked sufficient transparency to allow proper valuation. When the mortgages insured by these started to default, investment banks failed because they couldn't liquidate the CDS paper, or even properly value it. High leverage played a role, but it was the bad loans and at the base of the whole pile along with bad insurance paper that caused this.