today interest and loans rate , will they move.

loans and saving will find out today , what is happening next

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Back in the UK, the Bank of England will announce its latest decision on interest rates later today. It is expected that the key UK rate is likely to remain frozen at 4.5%. The Bank's specific concerns include the impact of rising energy bills on inflation, and the potential for any rate cuts to reinflate the housing bubble.

the dollar could be the answer read on.


Almost the entire edifice of neo-classical economics and modern financial theory is predicated on the assumption that investors act rationally. After all, why would anyone wield their hard-earned funds in an irresponsibly unhinged way? More to the point, surely anyone who did so would quickly lose their shirt and be unceremoniously removed from the game?
But the thing is that, although investors are, on the whole, rational, markets can take their time to come to their senses. Remember the dotcom bubble? Sure, none of the valuations made any sense. Absolutely, it was all going to end in tears. But it took its own time to run full circle.
The dotcom bubble may be an ever-diminishing memory in the rear-view mirror of the past, but markets are again doing the “wrong thing”. They’re not being rational, and once again Warren Buffett, who famously missed out on the whole tech-market rally, appears to have got it wrong.
His Berkshire Hathaway group had a “very long-term” bet against the US dollar that by June totalled $21.5bn. However, after the first six months of 2005, the dollar had risen more than 10% and Buffett was down $926m. He has subsequently been forced to cut his exposure back.
This was not supposed to happen. Buffett, and he was not alone, predicted that the dollar would weaken because of the huge US trade deficit. As the US sucked in more and more goods from around the world, the sellers of those goods would be receiving dollars and (since they weren’t spending them on US-made goods) exchanging them into their own domestic currency. Wouldn’t they?
Apparently not. It turns out that the countries with the biggest trading surpluses – Japan, Korea and, increasingly, China – haven’t been selling their hard-earned dollars. Instead, they’ve been buying US government bonds with them; effectively lending the money back to Americans to spend on yet more imports. Today, America receives three-quarters of the rest of the world’s savings.So attractive and cheap and free-flowing is this supply of credit that the US household savings rate is now below zero for the first time since 1933.
This makes sense to the Asians. They are having a tough time encouraging consumption at home, so their economies rely on the export industries for growth. It would be cutting off their noses to spite their face to push the dollar down, as that would push their export prices up. So far this year the US is the only major economy with rising short-term rates, so it’s no wonder the dollar has been on the up.
But there is a reason for America’s deficits, according to Fed chairman-in-waiting, Ben Bernanke. “There’s a glut of global savings,” he says. Roughly translated, his point is that it’s everyone else’s fault that the Americans are all up to their eyebrows in debt, because they shouldn’t have been lent the money in the first place.
Technically speaking, he is correct, in that one county’s deficit must be another’s surplus. But it’s just tautological nonsense to say that it’s a glut of global savings that is causing the US to go mad with its credit cards and that this won’t have nasty consequences. The world hasn’t seen a major economy run deficits of this size in modern times - so we can’t be sure it'll all end in tears. But it makes sense to think that anyone, or indeed any nation, that spends money now that it doesn’t have, will have to forgo that money later.
The Americans can’t live beyond their means forever. So what will this mean? When the US gradually ran down its current account deficit between 1987 and 1991, the dollar fell about a third, even though interest rates rose, unemployment went up and the economy slowed sharply. Such periods usually see inflation rising too, because a weaker currency means import prices rise.
It’s not happening yet, I grant you, but when you’ve got people such as Warren Buffett betting $20bn that it could be soon, it’d be foolish to suppose that America can continue partying on with impunity forever.
If building up deficits means strong, inflation-free, full-employment growth with low rates and strong asset markets, it rather suggests that unwinding them will give you the opposite. There is also a concern that the world’s “savings glut” will find a new home for its money, in effect forcing the Americans to stop living beyond their means.
With an inheritance like that, no wonder Bernanke would like to have us all believe this is a sustainable position, but I think we all know that it’s not. Likewise, even if his timing has been a bit out, you can see where Buffett’s mind is going. America has all the debt and everyone else holds all the IOUs, but it’s still Bernanke who controls the printing presses, so it’ll be awfully tempting for him to inflate his way out of trouble simply by expanding the money supply at speed.
That would make the dollar collapse, for certain. But the pain would all be with creditors (read ‘foreigners’) and the gain with the spendthrift debtors (read ‘US voters’). I don’t know about you, but I wouldn’t want a job abroad right now that paid in US dollars.

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