# Once you have zero interest rates it is very difficult to value anything



## ringledman (14 Oct 2009)

http://www.youtube.com/watch?v=WIGlBA1wtxI

Legend.


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## z109 (5 Nov 2009)

I'd add that once you have a zero interest rate it is very difficult to move away from it. Look at what the banks are offerring now - 2.5% introductory rates. What happens when they double to (what would normally be considered) a moderate 5%? Indeed, some of the SVRs are already at that rate, so any ECB raise could increase the payment shock when coming off fixed rates for mortgage holders.

It doesn't just apply to mortgage holders either. The government is likely to be in a similar situation come 2011/2012 when the debt that has been taken on recently is due for refinancing. 

Ireland and its component parts face a real risk of another dip when the ECB starts raising rates. Unfortunately, the larger economies in Europe do not have such a pressing need, at least on the consumer side, being tied closer to fixed rates. For other european states, it's a different matter, but with lower consumer shock, they presumably have scope to raise taxes. The scope here seems to be limited...


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## onq (5 Apr 2010)

Adopting and then devaluing a local Irish currency, that would operate within Ireland as a means of exchange and have an external exchange rate with the Euro, has been mooted somewhere IIRC.
This seems to be a half-way house towards David McWilliam's suggestion that we should decouple from the Euro.

This seems to echo Ellen Brown's Web of Debt scenario http://www.webofdebt.com/ where individual American States print their own currencies and are not dependant on Wall Street, with Ireland as a State within Europe.

I don't know how workable either is, but tying ourselves to the Euro as a nett exported seems to be hobbling any recovery.
My understanding, however, is that this could be seen as being  tantamount to reneging on our debts which are priced in Euro and make it  harder to pay them back.
Depending on low interest rates to continue and the banks face into killing their host body is foolhardy.

"Capitalism went too far" was and astonishing comment on a round table talk show hosted on CNBC this morning at 9.30 a.m. - forget the name of it.
Basically they were agreeing that we may have "fixed" the banking crisis, but not the environment in which it occurred, that in the American system, everyting was "competitive" EVEN REGULATION, and that this led, and will again lead to, lack of prudence paving the way for this kind if crisis to occur.

FWIW

ONQ.


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