I know I should probably know this, but what are the likely impacts of base rates being lower than inflation? Or is it the LIBOR that matters more than the BOE? *cue Cardano*
If the reductions were passed on, it would be very inflationary, but they almost certainly won't be passed on. In the past few weeks we have seen big, big falls in commodities, shares and coorporate bonds. This is the first indication to me that we may be in the first stages of a classic debt deflation. I had assumed previously that we would see some sort of hyperinflation (inflation > 20%), to reduce the real value of debts, but the immediate danger seems to be deflation (ie debt repayment and default).
