John Humphrys Vs Ed Balls, Today Programme

[Tired of Waiting]

Ed Balls admits that low interest rates were the main cause of the credit/debt bubble crisis.

Up to now Brown and Balls have said that people borrowed more thanks to "low inflation", a "good Labour achievement". (Obviously they don't mention the tampering with the index from RPI to CPI in December 2003.) But today Balls may have made a mistake (Freudian Slip?), and went straight into "low interest rates". He said: "the fact is we had low interest rates, the fact is we had low inflation, and people were borrowing(...)" (8min 10sec into interview).

Unfortunately Humphrys didn't get Balls on the RPI x CPI manipulation, that kept interest rates even lower, and worsen the crisis.

I am still waiting for some journalist to press Brown or Balls for it (Also "Tired of Waiting" for that too!) :angry:

Listen Again Link (9 min long): http://news.bbc.co.uk/today/hi/today/newsid_8813000/8813648.stm

(Debt crisis: 5min 45sec into interview.)

(Low interest rates: 8min 10sec into interview).

Edited July 13, 2010 by Tired of Waiting

[Timm]

Ed Balls admits that low interest rates were the main cause of the credit/debt bubble crisis.

(...)

So he wants higher rates?

[Traktion]

Do you think the central planners will ever get the "right" interest rates? Trying to measure the demand for credit by a series of price indexes, even when imported goods are included in them, is folly. Targeting any positive inflation is a nonsense anyway, as the only way to expand the money supply to meet such a gain, is ever lower interest rates and ever more borrowing. The zero bound rate issue was always, and inevitably, going to become a problem, right since the day 'the great moderation' started.

It's high time that the credit supply was dictated purely by individual savers' propensity to lend out their savings. This should be balanced by their need to have instant access to the money (the bit they don't lend on) and by how much individual risk they wish to be exposed to (what sort of return, balanced by risk, they would target).

The financial system needs the central planners removed, with the open market taking over instead. Fractional reserve banking should be junked in the process, as it's inherently unstable (and bank runs aren't very fair). There are better ways of going about distributing capital, with Limited Purpose Banking (see sig) presenting one such good alternative.

Edited July 13, 2010 by Traktion

[Bruce Banner]

So he wants higher rates?

No, he wants to be Prime Minister and will do, or say, anything that he thinks will help to achieve that aim .

[Tired of Waiting]

Do you think the central planners will ever get the "right" interest rates? Trying to measure the demand for credit by a series of price indexes, even when imported goods are included in them, is folly. Targeting any positive inflation is a nonsense anyway, as the only way to expand the money supply to meet such a gain, is ever lower interest rates and ever more borrowing. The zero bound rate issue was always, and inevitably, going to become a problem, right since the day 'the great moderation' started.

It's high time that the credit supply was dictated purely by individual savers' propensity to lend out their savings. This should be balanced by their need to have instant access to the money (the bit they don't lend on) and by how much individual risk they wish to be exposed to (what sort of return, balanced by risk, they would target).

The financial system needs the central planners removed, with the open market taking over instead. Fractional reserve banking should be junked in the process, as it's inherently unstable (and bank runs aren't very fair). There are better ways of going about distributing capital, with Limited Purpose Banking (see sig) presenting one such good alternative.

If the BoE had followed RPI, interest rates would have been around 1% higher from 2003-2008. If mortgage rates were also 1% higher in that period, say 5% or 6%, instead of 4% or 5%, buyers would have their budget's top limit reduced by some 15% or 20%. That would have removed much of the "sting" from the bubble.

.

Edited July 13, 2010 by Tired of Waiting

[Traktion]

If the BoE had followed RPI, interest rates would have been around 1% higher from 2003-2008. If mortgage rates were also 1% higher in that period, say 5% or 6%, instead of 4% or 5%, buyers would have their budget's top limit reduced by some 15% or 20%. That would have removed much of the "sting" from the bubble.

.

A kick in the shin is better than one in the face, but it doesn't make being kicked a good thing.

Regardless of whether you follow RPI, CPI or even M4, it is still mathematically flawed to aim for a positive increase, YoY, indefinitely. If you keep the base money supply constant, the only thing that can be increased is the supply of credit; this cannot go on indefinitely (queue liquidity/solvency crisis), which is why they've had to print a load of money.

So much for an 'elastic money supply' - it is just stretched, 'til it snaps, then the government gives them a longer piece of elastic!

[Ologhai Jones]

As out of his depth as Ed Balls sounded, John Humphrys sounded even more out of his depth to me.

They should've had an economist interviewing him. It's a shame that the Today programme doesn't have guest interviewers on sometimes... like one of the MoneyWeek crowd (MSW or John Stepek, say)... to grill these half-wits.

[Tired of Waiting]

(..)

Regardless of whether you follow RPI, CPI or even M4, it is still mathematically flawed to aim for a positive increase, YoY, indefinitely. If you keep the base money supply constant, (...)

It is not impossible. 2% YoY is fine.

And you don't have to keep the money supply constant. Ceteris paribus, you would just have to increase it by 2% YoY.

[deflation]

I didn't hear it all but there's a rumour that Ed Balls muttered at the end of his R4 interview "That was a waste of time." Mics picked it up. Did anyone else hear it?

[Tired of Waiting]

As out of his depth as Ed Balls sounded, John Humphrys sounded even more out of his depth to me.

They should've had an economist interviewing him. It's a shame that the Today programme doesn't have guest interviewers on sometimes... like one of the MoneyWeek crowd (MSW or John Stepek, say)... to grill these half-wits.

Good point. Agree 100%.

Actually the BBC does have a good interviewer with a solid Economics Degree - Andrew Neil. But Brown has never agreed to be interviewed by him - 'quelle surprise' ...

[Tired of Waiting]

I didn't hear it all but there's a rumour that Ed Balls muttered at the end of his R4 interview "That was a waste of time." Mics picked it up. Did anyone else hear it?

Yes he did! Just heard it. Not in the link above, but if you go to the link below, click "Latest programme in full", and go to 7:58, you can hear it. The woman presenter even stops for a second, surprised.

http://news.bbc.co.uk/today/hi/default.stm

[Damik]

If the BoE had followed RPI, interest rates would have been around 1% higher from 2003-2008. If mortgage rates were also 1% higher in that period, say 5% or 6%, instead of 4% or 5%, buyers would have their budget's top limit reduced by some 15% or 20%. That would have removed much of the "sting" from the bubble.

.

if the house prices (and not mortgage payments!) were included in the CPI with a proper weight (let's say 20% of the CPI should be house prices, 20% food, 20% energies, 10% transport, 10% cloth and 20% anything else) the CPI would be much more higher and the higher interest rates would kill the HPI bubble in 2002/5 ...

surely if HPI is 20% pa and CPI 1.5% pa something is inherently wrong !!!

[Traktion]

It is not impossible. 2% YoY is fine.

And you don't have to keep the money supply constant. Ceteris paribus, you would just have to increase it by 2% YoY.

How are you going to increase the money supply by 2% YoY, without increasing base money (printing)?

If you have £100 total base money and lend out 33.3x times that money (3% reserves), you will have £3333.33 of broad money (M4). How are you going to keep increasing M4 by 2%? As reserves close in on zero, you will risk a solvency crisis - there is only so much leverage you can have on the base money, to keep the broad money supply growing.

I think many have realised that 3% reserves is too little, hence the calls for 10%+ reserves by Basal and the other fractional reserve banking experts. If you cap reserves at 10% and keep base money constant, how are you going to increase the broad money supply to generate positive, YoY, inflation? Remember, 'inflation is always and everywhere a monetary phenomenon.'

NOTE: Printing money is against the Maastricht Treaty, so the base money supply cannot be changed beyond which the BoE can buy back from the market (as in QE). Unless they break the rules, ofc, which they probably will sooner or later.

Edited July 13, 2010 by Traktion

[Vested Disinterest]

As out of his depth as Ed Balls sounded, John Humphrys sounded even more out of his depth to me.

They should've had an economist interviewing him. It's a shame that the Today programme doesn't have guest interviewers on sometimes... like one of the MoneyWeek crowd (MSW or John Stepek, say)... to grill these half-wits.

+1

[TheCountOfNowhere]

Is it me, or does Ed Balls look like the most devious untrustworth person you have ever met ?

He's probably a nice chap in reality but he makes my skin crawl.

[right_freds_dead]

No, he wants to be Prime Minister and will do, or say, anything that he thinks will help to achieve that aim .

for sure. lucky for us he is an absolute c0cksucker.

where the fµck is gordon brown these days anyway ?

gone into thin air. w@nker.

[Vested Disinterest]

also heard the "waste of time" :-)

it's at 1h58m on the listen again thingy.

[Bearfaced-Chic]

also heard the "waste of time" :-)

it's at 1h58m on the listen again thingy.

No, he definitely said 'So weak'...

Definitely.

[Tired of Waiting]

Is it me, or does Ed Balls look like the most devious untrustworth person you have ever met ?

Agreed!

He's probably a nice chap in reality

No way!

but he makes my skin crawl.

Agreed!

[Guest_flaps_*]

No, he definitely said 'So weak'...

Definitely.

[SarahBell]

No, he wants to be Prime Minister and will do, or say, anything that he thinks will help to achieve that aim .

Yup. Didn't Milliband go on about bringing back the ethos of Kier Hardie yesterday?

[jareth]

IMO Balls and co have swallowed the mantra of 'low' rates while ignoring or discounting the gambling that homeowners and banks alike have undertaken through the increased numbers of interest only mortgages. Banks and some homeowners have also been practicing mortgage equity withdrawal - Homeowners re-mortgaging and banks borrowing more and more from institutional investors, both doing so to take advantage of higher house prices.

[Tired of Waiting]

No, he definitely said 'So weak'...

Definitely.

I just listened to it again, three times, and I am almost sure Balls said "waste ... time".

But anyway, the point is that he muttered, on an open mike, meaning lack of self-control (and/or intelligence), and bad-temper, for a PM candidate?! Brilliant.

[interestrateripoff]

No, he wants to be Prime Minister and will do, or say, anything that he thinks will help to achieve that aim .

Yep, that's the name of the game. Agree with what's going to get elected.

[spongeh]

Is it me, or does Ed Balls look like the most devious untrustworth person you have ever met ?

He's probably a nice chap in reality but he makes my skin crawl.

Ed griffin or Nick Balls?