Thursday, Oct 22, 2009
Nothing new - House Price Inflation Not Such a Great Idea
Guardian: Rising house prices are only good news for economists
"...the Bank of England's measure of inflation excluded house prices, a fact that Mervyn King, its governor, bemoaned before and after the crisis, and you yourself agree should now be rectified. If house price inflation had never been mistaken for something fabulous, instead of something terrible, all those sub-prime loans wouldn't have looked nearly so attractive in the first place."
So now what? Surely not just more of the same?
Posted by sybil13 @ 07:56 AM (1333 views) Add Comment
6 Comments
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1. paul said...
At last, hallelujah. Mainstream economists are getting it. Rising house prices benefit estate agents and bankers and have really rather nasty externalities.
2. dbc reed said...
Agree with Paul.This is not an especially well researched article,though it is written with the scathing wit you expect from the Guardian's female writers, but it shows that the tide has turned when rising house prices are now routinely seen as a bad thing.She also takes a swipe at economists for being complicit in establishing the House price inflation good ! mythology, which is also becoming more common.
The Guardian has a good record in this respect: Ashley Seager long ago published sceptical articles about the alleged benefits of rising house prices before supporting the then unfashionable Land Value Tax; Larry Elliott has been more cautious but now supports LVT when the occasion arises.The Financial Times with Martin Wolf and Sam Brittan has always been a straight Land Value Tax paper but Land value tax support by them appears to be treated as lovable idiosyncrasy on their part .
Mind you its not too much to ask that people should look radically at Received Opinion when a monster house price bubble bursts and incapacitates the banking system : where were they when the symptoms were first manifesting? The biggest UK house price spike was in 1973.
3. drewster said...
dbc,
The Guardian has been ahead of this for a long time now. Both their readership and contributors are younger than other papers, which usually implies that they oppose high house prices.
To me, media sentiment hasn't turned until I see an article like this one in the Daily Mail or the Express.
4. smugdog said...
To the 'educated' Express reader, the headline "House prices back to normal - Rejoice" is music to there ill informed ears.
5. mander said...
Except that the Bank of England's measure of inflation excluded house prices, a fact that Mervyn King, its governor, bemoaned before and after the crisis.
I thought Bank of England is an independet body and Mervyn King only bemoans instead of acting against inflation including house price inflation. So who did engineered the bubble?
6. 51ck-6-51x said...
mander,
The BoE is _operationally_ independent:
The decisions made by the MPC are made independently.
However the inflation target itself is set by the treasury.
Gordon Brown changed this target in December 2003, see this letter.
If the target is not met then the governor must explain why and what the plan for remedy is to the chancellor.