Debate House Prices


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Osborne says that he would allow Bank to do more easing

worldtraveller
worldtraveller Posts: 14,012 Forumite
Part of the Furniture 10,000 Posts Name Dropper Combo Breaker
edited 9 October 2010 at 6:56AM in Debate House Prices & the Economy
The government will sanction more money being pumped into the economy if the Bank of England judges that more monetary stimulus is needed, Chancellor George Osborne said on Friday.

His comments are yet another sign the coalition government expects monetary policy to shoulder the burden if the economy starts slowing rapidly in response to planned spending cuts.

After cutting interest rates to a record low of 0.5 percent, the BoE started buying assets, mostly government bonds, with newly created money -- quantitative easing -- in March 2009 during the worst recession since World War 2.

The central bank then put quantitative easing on hold in February, after injecting 200 billion pounds into the economy. Most analysts still expect policy to stay on hold well into next year, after which they see interest rates rising -- one Monetary Policy Committee member has been calling for a hike since June as inflation remains stubbornly well above target.

But expectations of more easing have gone up after the U.S. Federal Reserve signalled it too stood ready to start more QE and Adam Posen, another MPC member, suggested he would vote for an expansion of the asset-buying programme at the Oct 8 policy meeting.

Osborne, who later this month is expected to announce the biggest spending cuts in a generation, made clear he would not stand in the Bank's way if it thought the economy needed more support.

"Obviously if the MPC asked there would be an exchange of letters," he said at a news conference on the sidelines of the International Monetary Fund/World Bank meetings in Washington.

"I regard the MPC as independent. If it makes judgements then I would want to basically follow those judgements."

Under the current framework, the BoE would have to ask the Treasury for permission to pump more money into the economy.

Reuters

An obvious statement, or something more in the message? :think:
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Comments

  • des_cartes
    des_cartes Posts: 368 Forumite
    QE if used will be used to manage the transition of the economy without allowing spending and house prices to fall off a cliff. The plan is to let prices fall at a rate where people with mortgages can pay down their debts as prices fall. If house prices fall by 3% a month, this will be too great and would cause spending in the wider economy to dry up. What is sustainable is falls of around 1% a month with consumer spending maintained. This is what the coalition will be trying to achieve through any further qe. There will be no return to printing funny money to replace long term sustainable growth. This goverment unlike Gordon Brown know where that would lead.
  • Degenerate
    Degenerate Posts: 2,166 Forumite
    des_cartes wrote: »
    There will be no return to printing funny money to replace long term sustainable growth. This goverment unlike Gordon Brown know where that would lead.

    Er no, he's just promised to go along with whatever the MPC request, which is exactly what Brown & Darling did.

    I guess it's only "funny money" when it's printed for a Labour chancellor.
  • des_cartes wrote: »
    The plan is to let prices fall at a rate where people with mortgages can pay down their debts as prices fall. If house prices fall by 3% a month, this will be too great and would cause spending in the wider economy to dry up. What is sustainable is falls of around 1% a month with consumer spending maintained. .

    Source? Evidence? Link?

    Didn't thnk so.....

    1% falls for even a few months would cause consumer spending to dry up and hurt the economy very badly indeed. There's no chance such falls would be tolerated for years without significant intervention.
    “The great enemy of the truth is very often not the lie – deliberate, contrived, and dishonest – but the myth, persistent, persuasive, and unrealistic.

    Belief in myths allows the comfort of opinion without the discomfort of thought.”

    -- President John F. Kennedy”
  • DervProf
    DervProf Posts: 4,035 Forumite
    edited 9 October 2010 at 12:38PM
    1% falls for even a few months would cause consumer spending to dry up and hurt the economy very badly indeed.

    Why ?


    As far as I know, the banks aren`t dishing out MEW deals like they used to, so falling prices shouldn`t make much difference there.

    Personally, I can`t work out what the value of my home has got to do with what I spend.
    30 Year Challenge : To be 30 years older. Equity : Don't know, don't care much. Savings : That's asking for ridicule.
  • Optimist
    Optimist Posts: 4,556 Forumite
    Part of the Furniture
    Strange really, in the 1940s Hitler devised a plan called Operation Bernhard. This was where they intended to print lots of money and flood the UK with it so as to destabilise the economy and trigger massive inflation. Nowadays the government calls it quantitative easing you couldn't make it up !
    "The whole problem with the world is that fools and fanatics are always so certain of themselves, but wiser people so full of doubts."

    Bertrand Russell. British author, mathematician, & philosopher (1872 - 1970)
  • Graham_Devon
    Graham_Devon Posts: 58,560 Forumite
    Part of the Furniture 10,000 Posts Combo Breaker
    1% falls for even a few months would cause consumer spending to dry up and hurt the economy very badly indeed. There's no chance such falls would be tolerated for years without significant intervention.

    it's all pointless anyway. They can't fall. The only way for prices to fall is to build more houses. :)
  • Source? Evidence? Link?

    Didn't thnk so.....

    1% falls for even a few months would cause consumer spending to dry up and hurt the economy very badly indeed. There's no chance such falls would be tolerated for years without significant intervention.


    Too late Hamish.

    We are back in it & they will start printing again.

    Some reforms to benefits/tax/public sector will be put on hold & the Tories & Lib Dems will be blushing a full on scarlet colour within 30 days.... A little like the Aberdonian muppets who kept on buying.



    Baaaaaaaaaaaaaah

    20061114_sheep.jpg


    I think you are in the picture, the one at the back who just shat himself... :D
    Not Again
  • A little like the Aberdonian muppets who kept on buying.

    :D

    Interesting.

    So given the fact that most Aberdeen buyers on a variable rate mortgage are now around £50,000 better off than Aberdeen renters since 2007, are you suggesting the better option would have been to rent?

    Really?

    I'd be delighted to see that reasoning.....
    “The great enemy of the truth is very often not the lie – deliberate, contrived, and dishonest – but the myth, persistent, persuasive, and unrealistic.

    Belief in myths allows the comfort of opinion without the discomfort of thought.”

    -- President John F. Kennedy”
  • Graham_Devon
    Graham_Devon Posts: 58,560 Forumite
    Part of the Furniture 10,000 Posts Combo Breaker
    Interesting.

    So given the fact that most Aberdeen buyers on a variable rate mortgage are now around £50,000 better off than Aberdeen renters since 2007, are you suggesting the better option would have been to rent?

    Really?

    I'd be delighted to see that reasoning.....

    Most Aberdeen buyers who bought in 2007, probably are not on SVR. Most people were ficing for 5 years.
  • HAMISH_MCTAVISH
    HAMISH_MCTAVISH Posts: 28,592 Forumite
    Part of the Furniture 10,000 Posts Name Dropper Photogenic
    Most Aberdeen buyers who bought in 2007, probably are not on SVR. Most people were ficing for 5 years.

    No graham, they weren't.

    In 2007, around 45% of people took trackers, and 55% fixes. But most fixes were just for 2 years, and most old style SVR's from high street lenders are very competitive even against the better trackers now available today.

    And don't forget Aberdeen (and in fact Scotland) is now firmly into capital gains as well.
    “The great enemy of the truth is very often not the lie – deliberate, contrived, and dishonest – but the myth, persistent, persuasive, and unrealistic.

    Belief in myths allows the comfort of opinion without the discomfort of thought.”

    -- President John F. Kennedy”
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