Monday, Apr 23, 2007
Kaletsky and the MPC get a savaging from John Stepek
Firstrung: We’ve had the boom - now comes the bust
John Stepek at Moneyweek anticipates economic bust and points out the time at which the MPC lost all credibility: "The Bank sealed the fate of the UK economy when it made that terribly timed, highly divisive decision to cut the base rate by a quarter point way back in August 2004, just as annual house price growth was on the verge of flattening." It really is fascinating to watch how the Bank of England's breach of what is, after all, a fairly arbitrary inflation target, suddenly has previously sanguine economic forecasters throughout the press shrieking for immediate action.
Posted by converted lurker @ 12:31 PM (475 views) Add Comment
10 Comments
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1. Cyril said...
Interesting to note that people lost confidence in the MPC in 2004. I have read elsewhere (in the FT I think) that people lost confidence in the golden rule ages ago, when Gordo began moving the start of the economic cycle to suit his borrowing plans. Elsewhere on HPC today there is an article saying that people have lost confidence in CPI as a measure of inflation. The funny thing is that none of this seems to have dented peoples' confidence in the housing market.
2. bidin'matime said...
Apart from the fact that it was August 2005 that the rate dropped (the month after I sold to rent..), not August 2004, this is a good article.
3. Jackpot06 said...
Yeah ...I remember it allllllllllllllllll to well likewise .........cos I sold to rent in the Nov ..........and have watched house prices go crazy since then .........aarghh --our time is coming ....
4. Papabear said...
I also sold to rent in May 2005 after becoming convinced that the market had stalled (as indeed it had in the previous months). The subsequent bounce has always left me dumbfounded but at least I get some comfort in knowing that my reasoining was fundamantally sound. What we have witnessed over the last 2 years has been fuelled by speculation as a result of cheap money. When the economic history of early 21st century Britain is written, the members of the MPC (past and present) will have a lot to answer for...
5. harold said...
bidin'matime, me too. I remember at the time EAs saying that prices had 'corrected' and were 'stable' in the summer of 05. They were, however, worried that another rise in IRs in 2005 would dent the market seriously. Instead what did they get? A flippin' cut! The cut in Aug. 05 was entirely political, designed to keep things rosy while the poodle was still in charge in No. 10. The boom is likely to end about 5 mins after he has left office.
What is democracy? Rule by the majority for the benefit of the majority - I see little evidence to support this notion.
6. japanese uncle said...
Incompetence defence, ladies and gentlemen.
I suggest the BoE adopt the disciplinary rules which penalise MPC members by implementing 30% salary cut for 12 months for each 'letter of explaining' to Chancellor, while the governor's salary must be cut by 60%. As I mentioned earlier, they are let off the hook just by saying "Sorry mate, we've done our best. Take it easy men, it's just of those things", which in effect is that ludicrous letter by Merding King's authorizing him to do any violent change.
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10. John_stepek_lover said...
i love John Stepek!