Towards the Perfect Storm?

I remember the very high interest rates of the 1980s and 1990s. These have been at historic lows {currently 0.1%} for quite a while now, 1% or lower for 12 years and as a consequence mortgage payments have been low. The Bank of England is already hinting at a rate rise to 0.25%. I remember 15%. There is a significant difference.

Here buying power is a hot topic for the upcoming presidential.

In the UK the housing ladder in above deity in the minds of many and thus people will stretch themselves to climb “Jacob’s Ladder” to the heaven of a big expensive groovy house. When I tell people here that if this house was on the Surrey Hampshire borders where we used to live, it would be > ten times the price, they struggle to believe it! 0.8 hectares, 190 metres squared of habitable space, river frontage and a stocked pond, could be about £2.5 mill.

If the interest rate goes back up to 2% then the size of mortgage payment will go up by say roughly a factor of ten. Not many of the stretched will be able to afford this. If it went to 10%, the brown stuff would hit the fan.

BoJo is talking about his zero-carbon vision where, by magic, it will create loads of jobs when there are no people to fill them. The governments around the world have all increased borrowing, there will need to be investment in the green revolution. The payments on the government debt will get bigger as the base interest rate rises. Taxes will need to rise, which will fuel inflation and cause the banks to raise the base rates. Which leads to an inflationary spiral.

Buying power will be like it is in Lebanon.

What happened in the early decades of the previous century?

I am not by nature a pessimist but all this hype against a poor fiscal backdrop is a bit like an ostrich with its head in the sand…

We may be heading for a perfect storm…

People, the populists, tend not to want to be the bearer of bad news…

It is mildly ironic, another volcano has gone off, after my post of yesterday.