Thursday, May 17, 2007
The Times is hedging its bets with inflation ...
The Bank – at last – gets tough with inflation: The Murdoch Times
A longish article from Anatole Kaletsky, who isn't quite as big a Noshbag as D. Smith. Having condemned the BoE for being asleep on watch last month, he is now supporting its stance. Some realistic comment towards the end balances the article by highlight upside risks to inflation.
Posted by talking rot @ 08:13 AM (159 views) Add Comment
6 Comments
- If you do not have an admin password leave the password field blank.
- If you would like to request a password allowing you to add comments and blog news articles without needing each one approved manually, send an e-mail to the webmaster.
- Your email address is required so we can verify that the comment is genuine. It will not be posted anywhere on the site, will be stored confidentially by us and never given out to any third party.
- Please note that any viewpoints published here as comments are user's views and not the views of HousePriceCrash.co.uk.
- Please adhere to the Guidelines
1. Orwell said...
I like this man - he says whatever comes into his head and will carry the favour of the editor that edition - he wasn't a lawyer like me by any chance before he went into the dismal science?
Never mind Anatole, ceteris paribus (all things being equal) yuo can be right all the time the stance you take - just change your view and refer to previous comment!
2. uncle tom said...
Kaletsky's conclusions are (unusually!) pretty much on track. The underlying factors that go below the data sources used for the BOE's predictions, (and are therefore rendered neutral to their calculations), look decidedly inflationary - so I expect actual inflation data to be to the upside of the BOE fan graphs, and for those fan graphs to be upwardly re-aligned.
The BOE should make another increase next month, and not wait till July - but it's not a done deal yet.
I predicted a year ago that the most likely rate at 2007 year end was 6%. It's an even call now whether we'll see 6% - or higher
3. financial planner said...
'Anatole Kaletsky, who isn't quite as big a Noshbag as D. Smith. ' You're joking. I went to a seminar yesterday when he actually said 'this time its different'. He's an idiot and paid fortunes for his bullish crap.
4. paul said...
IOf course, this makes Noshbag Smith look even more of a numpty:
http://business.timesonline.co.uk/tol/business/industry_sectors/banking_and_finance/article1781347.ece
5. sold 2 rent 1 said...
I'm with FP on this one.
Kaletsky says "By late 2008, with America emerging from its present economic slowdown"
How is the US going to emerge from its slowdown with record debts and a record housing bubble that is only just starting to burst?
May I suggest that we move the debate on from us all guessing where IR will peak? Most of us would be going for a UK peak of between 5.75 and 7.0% sometime over the next year. But what happens after that?
If we look at the last downturn in 2000-2002 the US had to crash rates to 1%, ECB bottomed at 2%, Japan at near zero, and the UK at 3.5%
Debt levels are significantly higher than then. If these economies go into recession the debt as a proportion of GDP will rise. How much lower will central banks have to crash their rates? Remember when rates hit zero it is game over.
As I said last week, this is classic K-winter IR movements. They rise initially and then fall hard to near zero.
No-one in their analysis has factored in any stock market crash at all. China’s stock market is parabolic with PE ratios of 50+ – it will crash sooner or later. In 100 years of DJIA history there has been at least a 10% correction/crash every 4 years. We are over the 4 year mark since the lows of 2003 and due for a large crash soon.
6. sirgoogle said...
The only way out of the debt mountain without triggering a recession is to allow inflation to eat it, however this must be done slowly. Therefore by using an index (CPI) that is lower than "real" inflation (i.e. the inflation experienced for different sectors of society) to set the Base Rates, the central banks will be able to slowly erode the debt.
Unfortunately anybody with savings that are tied to Base Rates will suffer - as the value of their capital will fall off by the difference between the base rate and real inflation.
Sounds like "price fixing" on a big scale to me.
Comments ..... Thoughts?