Arrived: Halifax figures for July!

Generali

mr.broderick wrote: »

i wasn't a million miles away

Only 5x out! Not bad really.

carolt

So who won?

Generali

carolt wrote: »

So who won?

Me. It was bound to be me.

WTF?_2

Sir_Humphrey wrote: »

The Fed tried to stimulate the economy by dropping IRs. They tried to bail out banks. The first objective was not to increase inflation IMO.

Bernanke's not called Helicopter Ben for nothing.

Sir_Humphrey

!!!!!!? wrote: »

Bernanke's not called Helicopter Ben for nothing.

The idea of helicoptering money is to stop deflation. The idea originates from Milton Friedman, founder of monetarism. Stopping deflation (negative inflation) is not the same as "inflating out of the problem".

And helicoptering money is not the same as cutting IRs anyway. It is more complicated than that.

dopester

!!!!!!? wrote: »

Inflation (across the board) would offer a quick fix: relieve the pressure on the indebted banks, make legions of indebted voters feel immediately better and might well be enough to win Labour the next election.

They can't do it. It would massively worsen the situation. To inflate away bad debts also means inflating away good credits.

All the money in Treasury bonds and the like would be sold and fly out of the market in an instant (via the electronic platforms traders use) to the safety of other investments.

The UK would be shunned for further borrowing or the markets would set the price of funding too high to offset any stimulative gains from inflation.

However a deflationary depression would write down the value of tangible loans which are collateral for loans in the banking system but increase value of sound assets including the value of government debt.

There are limits to everything including the good credit of governments. The risk for this Government is if it were to make noises about trying to re-inflate that is when we would most likely be taken right in to a deflationary vortex.

WTF?_2

Sir_Humphrey wrote: »

The idea of helicoptering money is to stop deflation. The idea originates from Milton Friedman, founder of monetarism. Stopping deflation (negative inflation) is not the same as "inflating out of the problem".

And helicoptering money is not the same as cutting IRs anyway. It is more complicated than that.

The principle is to print money and push it out there, ie inflate the money supply, to combat the dangers of deflation. He has said many many times in the past that is his preferred strategy for combating severe recessions..

As I've said many times this means one of these is going to happen:

They inflate too much and cause an inflationary spiral which ends either in Zimbabwe-like chaos or an even more disastrous deflationary bust...
They inflate too little and fail, introducing even more problems than doing nothing, maybe a very long mildly deflationary recession like Japan...
They get it exactly right and offset the slump, hence cheating the economic cycle.


I think the third possibility is the least likely outcome.

I also think that attempting to short circuit the inevitable effects of over-cooking things for many years is ultimately a bad idea. They have been playing that game ever since the dotcom bust back around 2001 and storing up yet more problems.

Best to let things take their course and do what they can to keep the system stable.

Or best of all to have had sound policies in the first place and not relied on creating a series of inflationary bubbles to offset each other, each bigger than the last.

Sir_Humphrey

!!!!!!? wrote: »

The principle is to print money and push it out there, ie inflate the money supply, to combat the dangers of deflation. He has said many many times in the past that is his preferred strategy for combating severe recessions..

For the reasons I and Dopester have said...

Forget it, it ain't gonna happen!

Monetarism is nonsense anyway IMO.

dopester

There is no reason to assume that the crisis was started by a deliberate deflationary action on the part of the monetary authorities, or that deflation itself is anything but s secondary phenomenon, a process induced by the maladjustments of industry left over from the boom.

-F.A. Hayek (1933)

The market is a powerful deflationary mechanism. Politicians are prevented from going wild with inflation because those holding bonds/gilts/treasuries can sell them and capital would fly elsewhere, causing the effect to be the opposite to what the politicians want.

100% Deflation.

Sir_Humphrey

I think the severe contraction of credit was the main cause of the deflation, in the same way that excess credit fuelled the bubble. Mix in the animal spirits of speculators (c) JM Keynes.

But then as a Keynesian sort, I would think that.