Re: Questions about interest rates.


"maggoo1 (nospam)" <@btinternet.com> wrote in message
news:t71u53ljl187lhblr4csusd1h0ia24ijd8@xxxxxxxxxx
When the bank of england decides to change interest rates why do all
the other banks follow suit?
Are they compelled by law to adjust their rates?
Why dont they just follow the market forces?

Or is most of the money they lend out,borrowed from the bank of
england in the first place?
If so who owns the bank of england?

maggoo

They are not compelled by law.

However, they themselves have to borrow money from various sources,
including 'The Bond Market', and the price of bonds (on the open market)
reacts to a number of different stimulii, including Central Bank interest
rates. Our Central Bank is the BOE.

For example, if I want to take out a 10 year fixed mortgage, you are
effectively buying money from the Bank who have previously bought that money
from the bank of England. The alternative for them would be to take the
money from their depositing customers, but if there is not enough, then they
just borrow the money from the market or the BOE. When the market requires
money, the BOE just prints it and then lends it at the current rate. That is
what causes inflation, the fact that money is being printed out of thin air,
and diluting the spending power of the existing money in your pocket.
However, if no money was ever printed like this, then economies could not
expand at times when money was needed, and Gordon Brown would not be able to
borrow money to pay for projects such as war , the NHS, and unemployement or
housing benefits, or any other schemes that make him look like a good
chancellor... When the chanceller borrows the money, he does so against the
future taxes, that the public are forced to pay unless they prefer prison as
an alternative.

The difference in the prices of lending and borrowing, is the Bank's profit
(or loss if you default on your mortgage), just like any other business.
That is why various banks have different rates, and some need to raise them
in order to offset the additional cost borrowing money.

Commercial Banks are therefore just buying a commodity (£s) from one place
and selling it to another, just like apples, fish or any other tradable
item. When the cost goes up for them, they have to pass it on to you, or
they would not be able to sustain their profits.

The Bank of England is owned by the taxpayer, but it is not controlled by
the taxpayer.


.

Relevant Pages

  • Mortgage mayhem spreading! Markets plunging!
    ... YOUR BEST SOURCE FOR THE UNBIASED MARKET COMMENTARY YOU WON'T GET ... look at the shellacking of bank and brokerage stocks: ... BNP said it will not allow investors to deposit or withdraw money out ... they're saying that the subprime mortgage meltdown ...
    (soc.culture.cuba)
  • They think we cant handle the truth.
    ... The truth may be unthinkable, ... refinance millions of defaulting mortgages ... ... They say their unbridled money printing won't devalue the U.S. dollar. ... the nation's fourth largest bank with nearly $800 billion in ...
    (soc.culture.cuba)
  • BORROWING FROM PETER TO PAY PAUL: THE WALL STREET PONZI SCHEME CALLED FRACTIONAL RESERVE BANKING
    ... THE WALL STREET PONZI SCHEME CALLED FRACTIONAL RESERVE BANKING ... stands in front of a bank teller, who is reading a demand note. ... invest their money, promising steady above-market returns; ...
    (misc.news.internet.discuss)
  • Re: Frogs gotta virus
    ... You mention a bonus payment depending on performance. ... they are getting money in accordance with their ... employment agreements, and remember, these are legal contracts. ... you saying that because your boss raises a loan from the bank ...
    (soc.culture.thai)
  • Re: Frogs gotta virus
    ... You mention a bonus payment depending on performance. ... they are getting money in accordance with their ... saying that because your boss raises a loan from the bank that he has ... I mentioned that this contracts where illegal. ...
    (soc.culture.thai)