Much has been made in recent days of the record breaking rise of the Dow Jones and many bulls in the market are predicting further rises. These record breaking rises seem remarkable when you consider the back drop of the financial stalemate up on Capitol Hill and the fragility that remains prevalent in the worldwide economy. So are these stock market gains sustainable or could a market correction be on the horizon?

Interest rates in the UK & US have been at record lows ever since the financial crisis gathered pace back in 2009. It came out yesterday that some members of the Bank of England are actually suggesting that negative interest rates should be considered in an attempt to boost the economy. Although the mouths of many people on tracker mortgages may be salivating at the thought, would negative interest rates really help the economy or would the potential negative consequences be too great?

In theory negative interest rates sound like a good idea. The theory is that central banks would actually be charging banks to hold their money so this might encourage banks to lend more. It may also provide a boost to the economy by giving mortgage borrowers on a base rate tracker mortgage another cut to their monthly mortgage payment. In reality though, there could be many short term and long term negative effects if interest rates were to head into negative territory.

For years the UK government has taken pride and even boasted about the fact that the UK has managed to succeed where other countries have failed by maintaining its AAA credit rating. It has also bragged that due to this AAA credit rating, the UK has been able to borrow money cheaply from the markets and as a result consumer credit and mortgage costs have remained low.

In a recent post on Money Bulldog we mentioned that now might well be the time to ‘Grab The Best Remortgage Rates While You Still Can!’. In that post we said that mortgage borrowing costs have been kept artificially low in recent years due to central bank intervention and low interest rates. We also said that with the economy falling down around us and inflation still running above its 2% target, those low borrowing rates may soon come to an end. Yesterdays announcement by Moody’s to downgrade the UK’s AAA credit rating could well be the first sign that those low interest rates could soon be a thing of the past. So how could the loss of the UK’s Triple A credit rating affect your pocket?

Rumours are today sweeping the financial markets of a possible intervention by the ECB in the Eurozone crisis to attempt to lower the interest rates that countries like Spain & Italy are being forced to pay on their bonds.

Speculation about the plan seems to be having the desired effect with Spanish 10 year bonds dropping off their Euro era high of nearly 7.6% on Thursday to 6.6% as I write. We’ve seen this reaction in the markets time and again in recent years when bailout speculation surfaces. A brief relief in market turmoil is often quickly reversed as bailouts fail and fears intensify again, helping market traders continue their game of Pass The Eurozone Debt Bomb!

So will the ECB’s latest possible round of bond buying solve the Eurozone crisis or could it actually make it worse?

Trying to fix a broken back with painkillers!

Just as you can’t fix a broken back with painkillers, I feel that bond buying is the wrong medicine to try to cure the Eurozone of its debt crisis! As we’ve already said it may provide some temporary relief by lowering interest rates but the pain soon returns. The ECB can buy up as many European bonds as it