Monetary Madness Continues
So didn't the ECB just cut rates? Yes, they did, and surprised some people in the process. They thought the EU economy could use the "boost" that a rate-cut provides (or so they say).
But what's this? The BOE (Bank of England) hints it will raise rates? Well, sort of. They're actually saying that the UK economy seems better than they thought three months ago. Of course, the UK is part of the EU, but doesn't use the Euro as a currency. They kept their own currency when they joined the EU. So they can raise or lower rates whenever the spirit moves them, no matter what the EU's central bank does.
Now, given that the EU's central bank lowered rates in consideration of their concern over a sluggish economy, and given that the UK is part of the EU, isn't there something of a conflict here - i.e., with the UK's central bank, the Bank of England's head man, Mark Carney, hinting that they might raise rates at some point, that point being if and when their unemployment rate drops to a certain threshold?
On the other hand, raising the rate for the British pound will make British products more expensive, wouldn't it? Yes, it would. And so their exports might fall, since the rest of the EU - which uses the cheaper Euro - might not want to pay up to buy British products. On the other hand, EU products would be cheaper for Brits, if their currency were stronger than the Euro.
It does make sense when you sort it out. The only thing is, it does get complicated, doesn't it? And you have to wonder whether the heads of these two banks - the EU central bank and the Bank of England - are right in their economic outlook. If they're wrong, and central bankers don't have the best record in predicting how their economies either are behaving or will behave, then these changes may be exactly the wrong thing to do.
And so goes the whacky world of currency manipulation by central banks under the great fiat money regime we've all been stuck with since 1971. On and on it goes, where it stops, nobody knows...
But what's this? The BOE (Bank of England) hints it will raise rates? Well, sort of. They're actually saying that the UK economy seems better than they thought three months ago. Of course, the UK is part of the EU, but doesn't use the Euro as a currency. They kept their own currency when they joined the EU. So they can raise or lower rates whenever the spirit moves them, no matter what the EU's central bank does.
Now, given that the EU's central bank lowered rates in consideration of their concern over a sluggish economy, and given that the UK is part of the EU, isn't there something of a conflict here - i.e., with the UK's central bank, the Bank of England's head man, Mark Carney, hinting that they might raise rates at some point, that point being if and when their unemployment rate drops to a certain threshold?
"When the threshold is reached, the MPC will set policy to balance the outlook for inflation against the need to provide continued support to the recovery in output and employment," Mr. Carney said in a news conference.This does seem a bit confusing, doesn't it? The EU says things are too slow; the UK (part of the EU) says things may not be. Then again, maybe it's not so confusing. Maybe things are better in the UK (a part of the EU) than they are in the EU as a whole. So the part (UK) is better than the whole (EU). It's certainly not illogical.
On the other hand, raising the rate for the British pound will make British products more expensive, wouldn't it? Yes, it would. And so their exports might fall, since the rest of the EU - which uses the cheaper Euro - might not want to pay up to buy British products. On the other hand, EU products would be cheaper for Brits, if their currency were stronger than the Euro.
It does make sense when you sort it out. The only thing is, it does get complicated, doesn't it? And you have to wonder whether the heads of these two banks - the EU central bank and the Bank of England - are right in their economic outlook. If they're wrong, and central bankers don't have the best record in predicting how their economies either are behaving or will behave, then these changes may be exactly the wrong thing to do.
And so goes the whacky world of currency manipulation by central banks under the great fiat money regime we've all been stuck with since 1971. On and on it goes, where it stops, nobody knows...
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