BoE MPC member says prices could drop to 2003 levels.

kennyboy66_2

PayDay wrote: »

"Danny obtained his BA in Economics from the University of Leicester (1973), his Masters in Economics from the University of Wales (1983) and his PhD in Economics from the University of London (Queen Mary and Westfield - 1985)"
http://www.bankofengland.co.uk/about/people/biographies/blanchflower.htm

Born in Britain, educated in Britain. lived in Britain until he was 37, takes his nickname from a Tottenham Hotspur captain.

I'd say that makes him British unless you think Greg Rudeski is more British.

kennyboy66_2

!!!!!!? wrote: »

Yet 'imported' deflation in consumer goods was used to justify the stupidly low rates of the last few years - now rebounding so disastrously on us since the housing bubble no longer hides the effects of the inflation. :rolleyes:

Now that we have raging price rises from the inflation, all of sudden we're told interest rates don't have an affect on it because a lot of it is 'imported'.

So, low inflation due to imports = low interest rates. High inflation due to imports = low interest rates.

Hmm, something not right there but I can't quite put my finger on it. :cool:

So rates should have gone up when house prices were booming, and the economy was zipping along (undoubtedly they were kept too low) but now that we are in recession and house prices falling, interest rates need to go up.

Hmm, something not right there but I can't quite put my finger on it. :cool:

WTF?_2

kennyboy66 wrote: »

So rates should have gone up when house prices were booming, and the economy was zipping along (undoubtedly they were kept too low) but now that we are in recession and house prices falling, interest rates need to go up.

Hmm, something not right there but I can't quite put my finger on it. :cool:

Yes - you are missing the reasoning behind putting rates up sooner rather than later.

The point being that if you don't raise them proactively ahead of time to head off problems, you end up having to jack them up later when you can least afford it.

Yes - rates ideally need to come down to stimulate the economy - but they can't because consumer price inflation is now rampant and the government are about to embark upon even more borrowing to try to get themselves out of this mess (which entails offering higher rates on sterling bonds).

Had they raised rates ahead of time, they wouldn't be in this mess. Inflation wouldn't be as big an issue and the scope of the decline wouldn't be as great as it is. All lowering rates now is going to do is give us a large dose of price inflation along with the economic misery. People have gorged so much on the cheap credit of the past that they are maxed out on credit and not likely to give the retail/service sector a boost no matter how low you try to make rates. Plus their too-low rate policy has resulted in a divergence of real world interest rates and central bank rates.

kennyboy66_2

!!!!!!? wrote: »

Yes - you are missing the reasoning behind putting rates up sooner rather than later.

The point being that if you don't raise them proactively ahead of time to head off problems, you end up having to jack them up later when you can least afford it.

Yes - rates ideally need to come down to stimulate the economy - but they can't because consumer price inflation is now rampant and the government are about to embark upon even more borrowing to try to get themselves out of this mess (which entails offering higher rates on sterling bonds).

Had they raised rates ahead of time, they wouldn't be in this mess. Inflation wouldn't be as big an issue and the scope of the decline wouldn't be as great as it is. All lowering rates now is going to do is give us a large dose of price inflation along with the economic misery. People have gorged so much on the cheap credit of the past that they are maxed out on credit and not likely to give the retail/service sector a boost no matter how low you try to make rates. Plus their too-low rate policy has resulted in a divergence of real world interest rates and central bank rates.

The time to proactively raise rates has long past.
I'd be the last person to say that rates should be cut agressively & hope they stay roughly where they are for the next 6 months.
Retail sales are diving, house prices will continue to fall, unemployment is rising, oil MAY have peaked as MAY food commodity prices.

To raise rates now is the economics of the madhouse.

It smacks a little too much of wanting to punish reckless borrowers.

WTF?_2

kennyboy66 wrote: »

The time to proactively raise rates has long past.
I'd be the last person to say that rates should be cut agressively & hope they stay roughly where they are for the next 6 months.
Retail sales are diving, house prices will continue to fall, unemployment is rising, oil MAY have peaked as MAY food commodity prices.

To raise rates now is the economics of the madhouse.

It smacks a little too much of wanting to punish reckless borrowers.

Why do you think we actually bother to have interest rates set by the central banks and don't go for a permanently fixed 0-2% rate?

From a 'stimulating business' point of view, interest rates should always be low. Cheap money makes for easy business expansion and retail sales.

But there's more than one thing driving economic policy.

From a protecting from inflation and supporting the currency point of view, they may need to be higher.

By stupidly keeping rates too low for too long they have now landed the economy in a position where rates can't come down to stimulate business without serious effects in other areas. You can't just lower rates 'to help business' when there are other pressing worries too.

MissMoneypenny

kennyboy66 wrote: »

Born in Britain, educated in Britain. lived in Britain until he was 37, takes his nickname from a Tottenham Hotspur captain.

I'd say that makes him British unless you think Greg Rudeski is more British.

Blanchflower is a British and US citizen. He was born and educated in Britain but has lived in the US for the last 19 years according to wiki
http://en.wikipedia.org/wiki/David_Blanchflower

m00m00

wherever he's from, he's wrong.

harryhound

The funny thing is that Germany became the world's largest export economy and had the DM one of the world's most valuable currencies at the same time.

Perhaps German industry realised that they had no soft option, nobody liked them much, so they just had to be good at what they did. Sensibly organised education and training system and a bunch of cheap Turks imported during the booms?

Britain? We just got permanently stuck at the bottom of a never ending "J" curve, until rescued by North Sea oil.

We cannot turn up the supply of North Sea oil, because we have squandered all the easy reserves.