Rising Interest Rates – Is Gordon Brown Saving Us?
	Could it be true, Mummy?

With a global recession an agreed universal affliction and MPs already in the dog-house after being caught with their hands in the cookie jar, are we now in danger of having nobody responsible or punishable for what happens next?  …and if nobody is responsible for what happens next, then we could be in for bigger bills, higher council tax, reductions in public services and worst of all, rising interest rates.

Our Prime Minister, if the general media consensus is correct, is a ‘dead man walking’.  If he is and has no support amongst his peers or the electorate, then he has a year to save himself before the next General Election.  With that in mind, he would struggle to do that if interest rates were killing people, so we may be safe for now (here’s hoping), however, a new administration would have to clear this recession from memory by the next General Election.  High interest rates early on in a new administration, would liquidate a lot of the banks’ toxic assets for which the Government have kindly promised to guarantee for them, in addition, obviously the banks’ turnovers increase pro rata (and, I presume, the share price).  It would also increase overseas investment and create opportunities for well financed companies, as poorly funded companies fail in a rising market - with the added bonus being that the new administration could say it was not their fault.  There are numerous and diverse negatives to this policy that would be borne, as ever, by the man on the street, however, as the old slogan goes: “if it’s not hurting. It’s not working”.  Well, right now, it is hurting ‘cos it’s not working. 

The general approach from our politicians seems to be: shore up corporate chums and wait for the genie of the markets to reappear.

Brown has no money left, according to the Governor of the Bank of England, unemployment is up daily, companies are still failing at an alarming rate and peoples’ houses are being repossessed in ever increasing numbers.  All the symptoms and spin-offs of recession – except for rising interest rates.  Is this luck, market forces or design?  If it is market forces then we may be in for a shock as the market recovers/changes, as they have short memories.  If it is by design then does that suggest that there is a far greater degree of politico/financial control going on in the world economy than the world leaders are prepared to admit to?

We have been there before and know what it would do to our current fragile suburban economy.  The banks could get short term relief and long term grief if rates rose too high, too quickly, but we need to be aware that as the ‘green shoots’ of recovery start to show on the High Street, the banks may start to creep interest rates along with it – which is OK if your personal finances also show signs of recovery on or above par , however, if not, higher interest rates could be the financial death knoll for many British households.

Already, fixed term mortgage rates over 2 years have risen again this week – yes, including Northern Rock!  What does that tell us…?

So in summary, let us hail green shoots, if they do exist, but when considering your next financial move, bear in mind the spectre of high rates and how that could affect your venture, be it a new house, extension, expansion loan, overdraft or whatever. 

Mervin King announced during a dinner speech this week that The Bank of England needs more power to effectively bring in the changes needed in the financial markets.  Alastair Darling was at the dinner and later responded that the BofE had everything it needed to fulfil the charge of reform.  I am not exactly sure where this leaves us, however, it does raise a strange quirk that would have been unthinkable in the class driven political system of the 60s and 70s.  A Labour Chancellor disagreeing with the Governor of the Bank of England that more powers were needed for financial regulation.  Maybe, it is aspirational from Mervin King and so not surprisingly slapped down by the Chancellor, I am sure that has been going on for centuries.  Maybe it is personal between the personalities involved and disagreements on roles and remits - IOUs even.  Or maybe Alastair Darling is concerned about increasing banking regulations at a time when his Government owns significant stakes in the major players.

I suppose we will just have to wait and hope, that’s what our politicians are going for…