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KingBingo

Boe Proping Up House Prices

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http://www.johnredwoodsdiary.com/2009/06/0...nd-needs-to-do/

What the Bank of England needs to do

Published by John Redwood under Blog

The Monetary Policy Committee will probably keep interest rates at 0.5% and chug on with their programme of quantitative easing. This policy will keep house prices higher than they need to be, will keep many savers starved of a proper return, will extend the government bond bubble,encourage too much debt and do nothing to sort out the huge imbalances in our distorted economy.

Sometime the authorities have to

1. End quantitative easing

2. Curb the public deficit

3. Bring the recommended interest rate into line with the reality of what banks are offering and charging

4.Offer help in the form of lower taxes and less regulation to the exporting private sector, to slash the trade deficit further

They may not want to start to do this even now, but they could at least tell us they want to do it, and sketch a timetable for returning their management of money markets to something more normal. Otherwise it will look as if they are just going in for a political fix for this year, delaying the essential adjustments the economy needs to make.

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At last someone in politics is talking about this. The interventions in the market and the economy are are unsustainable, highly damaging and totally politically motivated.

Why is nobody in the conservative party talking about sound money, moral hazard and the restructuring of our warped economy?

My sig proves they used to know what they were talking about.

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Yes, there is a definite feeling of delaying the further crash for the moment. if IRs were where they should be prices would be more realistic. Anyway, rates can't go much lower, hence the Q.E.

+1

But how long can they keep this going?

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At last someone in politics is talking about this.

The interventions in the market and the economy are are unsustainable, highly damaging and totally politically motivated. Why is nobody in the conservative party talking about sound money, moral hazard and the restructuring of our warped economy?

My sig proves they used to know what they were talking about.

Indeed.

I have to say, I can't stand the man - but he is right on the money with this.

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do you think Cameron listens to Redwood? Redwood may come across as "other worldly" but he does have a lot of ability and insight when it comes to economics. I don't really want to vote Tory but if they have a good team on the economy I'm willing to overlook the other stuff.

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Why is nobody in the conservative party talking about sound money, moral hazard and the restructuring of our warped economy?

Well in fairness they have.

http://www.policyexchange.org.uk/research_...ed=publications

Although in all fairness when you say sound money if you mean 100% reserve requirements then no because it is believed that 100% systems don't work as the market just uses near money substitutes. They do favour much higher reserve requirements than the 4% we have now however.

Edited by KingBingo

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do you think Cameron listens to Redwood? Redwood may come across as "other worldly" but he does have a lot of ability and insight when it comes to economics. I don't really want to vote Tory but if they have a good team on the economy I'm willing to overlook the other stuff.

I have no idea about Cameron himself, but I know lots of his inner circle are avid readers of the blog.

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Could this be the same John Redwood who, in recent years, was advocating unregulated mortgage lending?

Granted, the man is bright, but seems devoid of any understanding of human psychology .......

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