Monday, Dec 15, 2008
A look back on how brown discovered the housing bubble in
FT.Com: Asleep at the wheel
It is often wrongly claimed that Gordon Brown failed to spot the housing bubble. In fact, he called the bubble as early as 2005. The trouble was he believed he had addressed it. Brown thought he had successfully managed a boom without a bust.
Posted by gone-to-colombia @ 06:07 PM (1700 views) Add Comment
36 Comments
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1. mountain goat said...
Spotting it and being able to stop it are different, this is true. I think if the cost of housing could have been included in inflation estimates, action could have been taken to keep the bubble more contained.
2. alan said...
"...full employment for our generation.." just after 6 minutes in.
I think this bloke has some explaining to do. When will the excuses stop?
3. drewster said...
People in positions of power are free to screw up royally and get away with it. They don't agonise about whether they are wrong; they let the power go to their heads, they believe they are always right no matter what. This psychology is why people like George Bush will quite happily state that black is white, and believe it too.
Let's get this muppet out of office before he screws things up even further!
4. Eternal Sceptic said...
Nu labour have put so much spin on every statistic that they no longer recognise reality. Their ridiculous way of calculating inflation reads like something out of alice in wonderland. The most pathetic excuse they can come up with for our present parlous state is that the economic problem is worldwide. This latter statement may be true but Britain seems to be in the same sorry state as America. Lax policies, lax enforcement and lax government. Happens evertime Labour comes to power but this time they have even exceeded their own expectations. I just hope their is sufficient infrastructure left to vote by the time they are forced to face the electorate.
5. Neo-serf said...
See you next Tuesday Gordon
6. goweresque said...
GB should be tried for treason for his mismanagement of the economy. He put the desire to win the election in 2005 before his duty to manage the country's finances prudently. Had he saved the tax revenues he was coining in throughout his Chancellorship, rather than spending them, and reined in the banks by including house prices in the BoE inflation remit, we would now indeed be well placed to ride out this downturn. Unfortunately unless we overturn centuries of democracy, there is little chance he will personally pay any price at all for this treachery. The only thing we can console ourselves with is that I doubt history will be kind to the 'Iron Chancellor' who had apparently abolished boom and bust.
7. angonamo said...
goweresque - totally agree with you - he spent every penny he got and saved nothing. That's why he's screwing savers now.
Sadly we'll never get any pay back with him (or AD), they'll both end up with a seat on the board of one banks they gave our money to.
8. it_is_going_with_a_bang said...
To be fair to Gordon I am sure when he first came to power in 1997 - as chancellor - he had the best of intentions.
Many of the schemes he introduced were i believe fundamentally good ideas.
His problem is that he has caught the same disease as others in a position of power over a sustained amount of time.
Now his policies just change to suit what he thinks will get him votes. Which is a problem since so many people in this country don't much care about anything other than themselves.
To make it government policy just to stay in power is a dangerous game to play.
Now his policies just look more like that of a dictator on a daily basis.
I am now just looking forward t the day he is punished at the ballot box.
9. paul said...
"and reined in the banks by including house prices in the BoE inflation remit"
He could have avoided the house price boom and bust just by letting the Bank of England actually do its job. This article from Market Oracle demonstrates the point perfectly that the BoE hasn't been targeting inflation at all - but house prices (surprise surprise):
http://www.marketoracle.co.uk/Article3615.html
Eddie george stated in 2003 that this strategy is dangerous but that didn't stop Brown using as much political leverage as he could muster to get the MPC to drop rates whenever house prices dropped below the magic 9% annual growth.
10. braindeed said...
Broon was a catalyst for this nonsense.....same as Thatcher, Lawson, Lamont, Major, - populist clowns the lot of them.
Tories get off your soap boxes - Nu Lab came to power promising to maintain the Tories spending plans, amd did so for two years.
No....this is our fault - we wanted 4x4;s 2/3 foriegn holidays a year, and to spend our 'riches' from the house ATM - sod the FTB's buying over-priced crepe - and mortgaging their futures to keep the supercasio/BTL scum in free dosh.
Not a squeak from the grizzlers here when they were 'rich' - it's payback.....get used to it, you muppets!!!!
11. Maihem said...
@braindeed,
Thatcher was a populist clown? When did she ever try to do anything to make herself popular?
12. Earthstick said...
That's a great article. I love the way they put the housing comments in bold. They have shown with Browns own words that he has done exactly what he claims to have and all without writing a word against him.
13. This comment has been removed as it was found to be in breach of our Blog Policies.
14. phdinbubbles said...
Agree with Drewster
Although I'm not entirely convinced that the likes of Bush actually believe themselves when they say black is white though - the point is that they don't care when they lie (because of a limited or absent conscience - either as a result of psychopathy or the corruption of power), so come across as being convincing. What I think matters to them, is that other people believe them when they say black is white - it is important for them to get affirmation from others to maintain their position of superiority. Classical narcissism (or maybe narcissistic personality disorder in the case of Bush) imho.
A classic example of this kind of thing would be Mohammed 'al' Fayed's (the most obviously pathologically narcissistic individual I can think of) insistence that Prince Philip was behind the death of Diana and Dodi. I don't think he genuinely believes this to be true, but would me more than happy if he could convince everyone else that it's true (and that way people won't blame him for putting his pissed employee in the driving seat) - a lack of conscience (about accusing someone that's innocent) and projection of blame. Brown does it slightly more subtly than Fayed though (or maybe if Brown was given the same scrutiny in court about the economy then he would look equally as foolish to more people).
15. gone-to-colombia said...
braindeed.......'No....this is our fault'
I really get sick of being given the blame for something I have no control over. Could it be that there is some kind of victim mentality at work here?
Please count me out of the blame game.
16. a saver said...
Well these words should come back to haunt GB but people have such short memories (at least I was out of the country at the time so missed it). Bank of England independence, cutting debt, fiscal discipline, inflation low MY A**!
"We will have the strength and resolution to take the right long-term economic decisions too.
Why has it been that at every point since 1997 faced with the Asian crisis, the IT collapse, a stock exchange crash, an American recession, last year a house price bubble, this year rising world oil prices, why has it been that at every point since 1997 Britain uniquely has continued to grow?
In any other decade, a house price bubble would have pushed Britain from boom to bust.
In any other decade, a doubling of oil prices would have put Britain first in last out and worst hit by a world downturn.
I tell you, it is because with Bank of England independence, cutting debt, fiscal discipline and the New Deal this Labour government has shown the strength to take the tough long-term decisions, that inflation is low, interest rates are low, growth has been sustained in every year, and we are closer than ever to the goal which drives us forward: the goal of full employment for our generation.
Labour, the natural party for economic strength in our country today".
17. braindeed said...
Gone to Columbia
"I really get sick of being given the blame for something I have no control over. Could it be that there is some kind of victim mentality at work here?"
So you were the saint....the holy one....who cried......
This is bad for societry,,,,it's wrong..?.....no, I thought not!!
It's Broons fault then.......wait a minute - the blame game, methinks.
We....as an electorate...that's who to blame - we voted the schisters back, time after time.
18. gone-to-colombia said...
I don't recall any party manifesto describing the kind of boom then bust we have and are witnessing. Given the choice I would have opted for a gentle growth in property values over the mad increases we have seen, I have only sought to benefit from my own efforts and not from speculation, I did not borrow more than I could afford in the hope that raised property values would help me and nor did I join the BTL brigade.
In the last decade I paid off my mortgage and saved.
I am not unusual, there are many out there like me – essentially blameless.
19. amjidk said...
yep agree with gone to Columbia, how can we all be to blame??
20. crunchy said...
5. angonamo said...
goweresque - totally agree with you - he spent every penny he got and saved nothing. That's why he's screwing savers now.
Sadly we'll never get any pay back with him (or AD), they'll both end up with a seat on the board of one banks they gave our money to.
crunchy: Kind of like Tony Blair. We get shafted and they get a pay rise. Go figure.
3. drewster
Let's get this muppet out of office before he screws things up even further!
crunchy: Which one? Muppet or Puppet?
21. phdinbubbles said...
@braindeed
"we wanted 4x4;s 2/3 foriegn holidays a year, and to spend our 'riches' from the house ATM"
Can't remember coveting said 4x4s. In fact when I first saw them filling the roads I thought everyone had gone mad - I asked myself questions like: Where are people getting the money from to pay for them and run them? Aren't they a bit dangerous (especially as they seemed to be driven by people who didn't appear to be able to drive and felt more secure in a big car)? Aren't they incredibly bad for emissions? Aren't they a bit big for manoeuvring in city streets and dropping off kids at school? I've had a few holidays but nothing I couldn't afford and I never used my house as cash machine - would have been tricky as I was renting. On the whole - not guilty.
22. jackas said...
braindeed.
There are pleanty of people that did not vote labour and did not behave in the way you describe.
They are the people that are currently bailing out the reckless. Blaming them for the mess is idiotic and ungrateful imo
23. bidin'matime said...
Braindeed - shouldn't that be braindead..?
24. mdmick said...
Actually, it was me and me alone. I take full responsibility. I am Brian.
25. gone-to-colombia said...
How shall we f *** oh lord?
26. techieman said...
Blimey - its obvious that as an electorate we voted for the bubble on the basis of ever increasing prosperity. You cant say "well i didnt vote for it" - incidentially i have not voted for a long long time - we live in a democracy (sort of - although its debateable whether or not we are given or indeed want all the information to make a democratic decision and whther or not we had a REAL choice).
I agree with Braindeed. The people here are taking his comments as a personal affront to them, thats blinkered imo and not what he is saying. Most of the people on this site now are those who have been prudent but obviously and collectively the electorate have lived beyond their means.
Anyway back to our leader - arrogance is a bad trait as is ignorance but when you have both and coupled with power thats a nightmare.
27. headmelter said...
She went to war with Argentina.
Maihem said...
Thatcher was a populist clown? When did she ever try to do anything to make herself popular?
28. landofconfusion said...
@ 11:06PM techieman said...
> Blimey - its obvious that as an electorate we voted for the bubble on the basis of ever increasing prosperity.
Not true.
> You cant say "well i didnt vote for it"
I have never in my life voted for Liebour at a national level). In fact, at every opportunity I have voted against them. Can you say the same?
> incidentially i have not voted for a long long time
Then you are part of the problem. Appapathy amungst good people allows dictators like TB & GB to get into power and consolidate their control. Apathy and ignorance coupled with greed allowed them to create this bubble and now I, a prudent and active anti-Liebour voter am being called as responsible as those who couldn't be bothered. Astonishing.
> we live in a democracy
Less then 34% of the vote gives them a significant majority in the lower house. That's not democracy (IMO).
> The people here are taking his comments as a personal affront to them, thats blinkered imo and not what he is saying.
Braindeeds' comments do seem to be aimed at everyone here. Also as a prudent saver who is fairly politically active I find his comments quite insulting.
29. phdinbubbles said...
To collectively say that we were all responsible is, imho, a bit ignorant and it is an affront to those who have played no part and have suffered throughout - e.g. potential FTBs priced out of the market and forced to rent for years whilst saving for a deposit. It would be more insightful to say there is a very large proportion of the population that were responsible in varying degrees of guilt (and that most of those were foolish, getting swept along with it all, group psychology, etc). But to just make a blanket statement saying it is everone's fault is equally as implausible as saying it's the fault of just one person or group. I find this a strange view to find on a website set up years before the housing bubble burst to give people a more informed perspective on the housing 'boom'.
30. Travisher-scorp said...
This all reminds me of my children fighting over who was to blame when a toy got broken.
Any pretence that there is a way of predicting or controlling the markets is clearly nonsense. Governments always believe their own rhetoric and those who are in opposition are equally deluded in thinking they can control it any better than the idiots who now have the the 'remote' in their hands. Empires rise and fall, markets rise and fall, that is their nature. Extreme events like a ponsi scheme slipping past the regulator are inevitable since you have simply handed over the responsibility of checking to someone who hasn't got your interests at heart. Why do extreme events that appear obvious in the rear view mirror keep surprising everyone? Take time to read carefully a book called The Black Swan. You may not like what Taleb says but I've yet to see anything that demonstrates that he is wrong.
31. techieman said...
Res ipsa loquitur
32. landofconfusion said...
@ 09:53AM Travisher-scorp said...
> Any pretence that there is a way of predicting or controlling the markets is clearly nonsense.
You might not be able to stop the river, but you can change it's course.
> Why do extreme events that appear obvious in the rear view mirror keep surprising everyone?
Maybe it's because everyone is looking in the rear view mirror and using it as a guide to future? After all, everyone knows that the car will crash but they all think that they'll get out just before it happens.
33. landofconfusion said...
@ 11:04AM techieman said...
> Res ipsa loquitur
I'm not quite sure who that's aimed at. Are you saying that the Turkeys are responsible for Christmas?
34. techieman said...
LOC - as you have engaged i assume you know some latin? (it means the facts speak for themselves) Iwill rebut your rebutal:
1. Of course we have voted in a bubble economy - the only point i might agree with is that we havent realised how it would end and if there was an alternative. You say not true but without any attempt at qualification, i would like to be persuaded but the fact is we have voted (on admittedly a flawed base) for the boys in red a couple of times
2. Well ok if you want to say i didnt vote for it i suppose you can but that dont wash with me, for the same reason that i dont vote. You are under the impression that governments can miraculously and meaningfully modify the economic background. I have always said they cant - they can extend it yes, they can re-allocate resources etc, but at the end of the day the cycle is the cycle. If you want to vote for someone vote for someone who allocates your taxes that is in accordance with your wishes. To be frank no party floats my vote in that respect. Would the tories have gone to war with Iraq = yep, would they have encouraged the CIty = yep. To attack me personally for exercising my constitutional right not to vote without even wondering or exploring why is a little cheeky - i dont critiscise you on the basis of who you decide to vote for, thats a decision i respect. Actually i would vote for a local person to represent me if that did not confer a seat in our system. (so i am vehemently opposed to these MPs being given a safe seat when they have no idea of regional issues).
3. Your democracy point - you may have a point there that i am willing to concede. Having said that are you advocating proprtional representation? Personally i favour a vote for a leader and a separate vote for a local voice, the "presidential" vote then goes with the mathmatical majority, but i recognise that could result in a stymied legislature.
4. Im not sure his comments are aimed at everyone here - more the electorate in full, but to be fair i am not him so i cant really say. If they are aimed at people here then im not really sure why they would be offensive - i personally have alot thicker skin than that. Given your leanings im surprised you dont!
35. techieman said...
Travisher-scorp - i have read - and been bored by the black swan book. Perhaps LOC has read it and therefore provides the Turkey analogy? I didnt like it - it was imo far too convoluted and boring and gave no real insight but maybe im just a bit of a thicko, but by the end i said yea and so what?
36. landofconfusion said...
1. The word "We" in this context assumes everyone. As I have said, I have personally never voted for "the boys in red" in my life.
> 2. [...] You are under the impression that governments can miraculously and meaningfully modify the economic background.
They can affect it and they can, to some extent, mitigate the damage. Otherwise why have the FSA? Or the Competition Commission? Or the BoE for that matter? We (that's all of us who choose to vote) have the power to bring in new or at the very least change the mindset of the people in power so that things don't become so bad. When people choose ether not to vote or to vote recklessly and without diligence then that is when we have problems.
> but at the end of the day the cycle is the cycle.
Of course and you can't stop it but you can (as I have said) mitigate the damage and prepare for the inevitable. We are in this mess now because Brown convinced himself that he had done the impossible despite all the mounting evidence to the contrary. Maybe if he had studied History properly he would of come across the fable of the cricket and the ants.
> To be frank no party floats my vote in that respect. Would the tories have gone to war with Iraq = yep, would they have encouraged the CIty = yep.
As a voter you have a voice. They want your vote and will modify their actions to best suit what the majority of voters want. By not voting, you lose that ability and you lose your grounds to complain about the government.
I suspect that most people didn't want a war in Iraq (financial matters are a bit above most peoples' heads) but the majority didn't vote in the last election. Or write letters. Or attend rallies. In fact that's one thing which really annoys me. Every now and again I have to listen to someone at work moan about the government and their pensions/money/job security/whatever and when I ask them who they voted for they say "no one" or "What difference would it make". Well maybe if you voted and voted for the party which best suited or most closely matched your own desires and beliefs then things might be better. No two people have identical political views and if everyone voted and got politically active then you would soon start to see some real differences appearing amongst the political parties.
As it stands things are only like they are because political diehards like myself are the only ones left voting and it seems that as a prudent, sensible voter I'm in the minority.
> To attack me personally for exercising my constitutional right not to vote without even wondering or exploring why is a little cheeky
Perhaps but to do nothing is (IMHO) worse than voting for a 'bad' party. Your allowing others to make political decisions for you and to me that is quite frightening. But then I guess we all have different backgrounds and experiences.
> Actually i would vote for a local person to represent me if that did not confer a seat in our system.
Then write letters. Try your MP. Try your local papers. Try the other candidates and see what they say but whatever you do don't just do nothing. Otherwise you will get what you didn't vote for and you won't like it. Guaranteed.
3. [...] > Having said that are you advocating proprtional representation?
It's a nice system and if it were on the table then I would go for it but that being said, any system which lead to a majority vote rule would be better. I can't see it happening though. Not in this apathetic climate.