Monday, Apr 21, 2008
Letter from Bootle
Telegraph: The credit crunch and how to ease then end it
Summarises some of the points we have discussed here. Bootle advises that low interest rates are the solution rather than the current bailout. He optimistically assumes that inflation will stay in check. Well, he did write "The Death of Inflation". Plenty of the comments disagree. We are at an interesting point - if interesting is not too euphemistic.
Posted by letthemfall @ 10:51 AM (347 views) Add Comment
6 Comments
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1. japanese uncle said...
As seen in the case of Japan, the problem will never be blown over until and unless the bloated house price crashed to the rock bottom. When someone eats rotten meat and gets sick as a result, giving him a large dose of anti-biotic or anti-pyretic would never work. Just let him evacuate the bad stuff, which is exactly the house price crash. Let the nature run its course to bring recovery.
2. hpwatcher said...
I've read a few of the articles this guy has produced and I'm not sure he really know what he is talking about.
A bit of a crack-pot.
3. uncle tom said...
Well, Bootle seems to have moved toward my longstanding forecast that house prices need to drop 40% in real terms in order to achieve stability, and that before that happens they will overshoot and fall much further for a while.
But his belief that the chill winds of economic downturn will depress inflation is (I think) misplaced. Commodity and imported manufactured goods prices are rising very rapidly, although to date this has been largely concealed from the consumer by margin squeezes - but that won't last much longer.
His observation that increased exports would boost the economy is valid, except that we no longer have the basic infrastructure for a new era of manufacturing industry - it will happen, eventually, but it will be a long time in the making, and sterling will have to fall dramatically before risk capital gets pointed in that direction.
I don't think the BOE will take his advice on interest rates..
4. techieman said...
to me he makes sense for some time and then hedges his bets. I agree that commodity prices are not going to remain high for too long, and that a debt bubble deflationary depression is more of a worry than inflationary pressures over the next few years BUT the BoE arent going to agressively lower if and until the inflationary problems ease. The only way they could do that quickly is if the £ appreciates, and since most of the commodities are expressed in $, and i think the $ is likely to appreciate against the £ (in contrast to the Euro) then this seems to me to be a pretty unlikely scenario .
5. Northern Bear said...
I like some of what Roger Bootle has to say, but he seems to fall into the economists trap of imagining that economics is a science, and that by pulling this lever or pushing that button a predictable outcome will arise. He does mention the word 'depression' a few times in his article though. We will be hearing it a lot more in the coming months.
6. letthemfall said...
I don't think Bootle's a crackpot (not in the deranged Allsop sense at any rate): he has for a long time pointed out that inflated house prices have nothing to do with wealth and that they have been overvalued for some years. In return he has been shot at with the fatuous retort that he has been forecasting this for years and it hasn't happened (the implication being that it never will). His books talk a lot of sense, though are rather glib in places. For my money he is one of the more astute economic commentators, but none is infallible.