It is Obvious

Chris Rick has got altogether too much to say

That’s interesting

Posted by chrisrick13 on March 16, 2016

It’s obvious:  Look out!

As one of those who sits around like the cackling witches under the guillotine in Paris I often wonder when the head will arrive and how it will get there.

The country spends more than it earns and we have a huge national debt.  I do not have any debt but the people of this country have huge amounts of personal debt.  At some point the issuers of that debt are going to ‘send the boys round’.

I will mention that I am one of the debt holders as I am expecting a pension when I want to take it.  I nearly said ‘confidently expecting’ but I am not.  Alas I have no ‘boys’ to send round.  I have a vote but what use is that?

Pulling up at the gate of the country field a farmer leaning against it the driver asks “what is the best way to London” the reply is “I wouldn’t start from here”.  Alas “here” is where we are.  (Personally I am always “here”.)

I listened to some of the Chancellor today.  He tells me he is well on the way to fixing the roof while the sun was shining and is ready for the gathering storm clouds.  Tosh.  The government does nothing because you and I will not accept lower pensions, fewer hospital beds, people kicked out of prison because there is no room, holes in the roads, Russia flying bombers over Scotland (perhaps we could pay them to drop a few if they can target well), nasty stuff in our livestock and our food.  We will not accept a lowering of our living standards but will not pay for maintenance of it.

How will it happen?  I think it is simple.  Everyone is sure that the USA will do nothing with interest rates today.  There are plenty who think that some serious rises are on the way and soon.  Inflation might well be ready to rise.  The BoE sat on its fat arse for several years and watched inflation at 5% without doing a thing when its sole mandate was to keep inflation at 2%.  Thankyou Lord King.  How’s your pension?  Thank goodness that central bankers are so incompetent.  They have been collectively trying to get inflation up for a long time now.  If they actually knew what they were doing then surely they would have achieved it by now?

But inflation is coming.  Pressures are coming.  With higher inflation come higher interest rates.  Some of the truly economically healthy countries will act and put up interest rates.  The BoE will do nothing for as long as it can.  But there will be a squeeze.  Our exports will boom with a pound the same value as a dollar and a euro.  So will our imports.  The only way to get the pound to rise will be to raise interest rates.  Nobody will buy our bonds and lend us money.  Much of our debt is long-term but every day a hefty percentage comes due and has to be re-borrowed.  Only huge interest rate rises will persuade those lenders to lend us more.  They won’t have to bother sending the boys round they can just ask for their money when it comes due and not lend any more.

That is when our economy collapses.  Interest rates go up.  Not much.  There are many families still in negative equity on their home loan.  They are not the big problem.  There are many families who can pay their mortgage with bank rate at 0.5%.  Many of them can’t pay it at 1.5%.  When they start to default house prices collapse.  Importantly banks go bust.  These are the same banks that the government has supported for 7 years while it ignored the interests of you and me.

So that is how it will happen.  BoE base rate goes to 1.5%.  It is coming to a central bank near you soon.

It is obvious: Look out!  No look in.

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