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Andrew Sentance On Sky Jeff Randal Live

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Basically saying what I have been arguing for months

He does not believe deflation is a realistic proposition and argues that interest rates need to start rising immediately so that the rate can return to sustainable levels gradually, giving the money markets time to adjust.

Crucially he is the only member of the MPC who has any experience of the real economy - all the rest are academics.

When Jeff Randal raised the issue of Stagflation he ignored this and quickly moved on, suggesting to me that this is the 'nightmare scenario' which must not be discussed.

Clearly people like Blanchflower also know that deflation is never going to happen and are quite happy to see debt eroded by making the prudent pay for the reckless via high inflation.

At the end of the day the low interest rate, print money brigade believe that a debt crisis can be solved by more debt, wheras the sane amongst us realise that the pain cannot be avoided and that the people who should pay are those who racked up the debt, not those who resisted the temptation to live the high life at the expense of future generations.

:angry:

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Basically saying what I have been arguing for months

He does not believe deflation is a realistic proposition and argues that interest rates need to start rising immediately so that the rate can return to sustainable levels gradually, giving the money markets time to adjust.

Crucially he is the only member of the MPC who has any experience of the real economy - all the rest are academics.

When Jeff Randal raised the issue of Stagflation he ignored this and quickly moved on, suggesting to me that this is the 'nightmare scenario' which must not be discussed.

Clearly people like Blanchflower also know that deflation is never going to happen and are quite happy to see debt eroded by making the prudent pay for the reckless via high inflation.

At the end of the day the low interest rate, print money brigade believe that a debt crisis can be solved by more debt, wheras the sane amongst us realise that the pain cannot be avoided and that the people who should pay are those who racked up the debt, not those who resisted the temptation to live the high life at the expense of future generations.

:angry:

Yap...what I have been saying for a while too.

OK...now wait for the assaults from the deflationies and depressioniest.. tick tick tick...

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Basically saying what I have been arguing for months

He does not believe deflation is a realistic proposition and argues that interest rates need to start rising immediately so that the rate can return to sustainable levels gradually, giving the money markets time to adjust.

Crucially he is the only member of the MPC who has any experience of the real economy - all the rest are academics.

When Jeff Randal raised the issue of Stagflation he ignored this and quickly moved on, suggesting to me that this is the 'nightmare scenario' which must not be discussed.

Clearly people like Blanchflower also know that deflation is never going to happen and are quite happy to see debt eroded by making the prudent pay for the reckless via high inflation.

At the end of the day the low interest rate, print money brigade believe that a debt crisis can be solved by more debt, wheras the sane amongst us realise that the pain cannot be avoided and that the people who should pay are those who racked up the debt, not those who resisted the temptation to live the high life at the expense of future generations.

:angry:

Thanks for posting it. I think stagflation is the most likely scenario as well. I've tried to fing the interview online, but I've found only this, just 1 minute long: http://news.sky.com/skynews/Home/video/Andrew-Sentance-From-Monetary-Policy-Committee-Talks-Exclusively-To-Skys-Jeff-Randall-Live/Video/201009315738618?lpos=UK+News_1&lid=VIDEO_031692_%27Interest+Rates+Must+Be+Raised%27&videoCategory=UK+News

.

Edited by Tired of Waiting

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Blanchflower was on the BBC today saying that IRs need to be kept low for years. As I listened I wondered why he is so adamant?

I would love to know if he is highly leveraged with debt?

Interesting.

Is he living in America? IIRC they have lots of very long term fixed rate mortgages there, even 30 years fixed.

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Interesting.

Is he living in America? IIRC they have lots of very long term fixed rate mortgages there, even 30 years fixed.

Devon I think his BBC Studio stuff comes from.

I just do not trust anyone nowadays and wonder about all these 'experts' and I always wonder if they have a VI?

I mean, if I was on the BOE rate committee I might use language like "IRs need to stay low for the foreseeable future... until the end of the year... until Christmas... etc, etc," but I would not be talking about keeping IRs low for years and years as who knows what will happen in the coming months let alone several years from now?

To be blunt, anyone who tells me anything that is going to happen years from now and I treat it with suspicion.

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Devon I think his BBC Studio stuff comes from.

I think he teaches in some American university.

I just do not trust anyone nowadays and wonder about all these 'experts' and I always wonder if they have a VI?

I mean, if I was on the BOE rate committee I might use language like "IRs need to stay low for the foreseeable future... until the end of the year... until Christmas... etc, etc," but I would not be talking about keeping IRs low for years and years as who knows what will happen in the coming months let alone several years from now?

To be blunt, anyone who tells me anything that is going to happen years from now and I treat it with suspicion.

Yes, either VI or ideology. Most Keynesians are lefty.

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I think the left are panicking because the lesson of this crisis is that the state is now too big - both here and in the US and Europe.

There is no way back to the heady days of 2007 and the logical conclusion of this is a massive reduction in the state.

And the whole point of Keynesian economics is that governments pay down debt and reduce defecits in boom times so that they can increase debt and defecits in order to fund counter cyclical spending in depressions.

The fact is, you can't have one without the other - governments maxed out the credit cards in the good times and now there is absolutely no escaping the consequences - the only choice is pain now or even more pain slightly later.

Base rates should now be raised 0.25% points each month until they reach between 3.5 - 5% IMO

and if this is not done we risk rapid forced rate rises in the near future in order to combat stagflation.

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God I'd love to see deflation, but I just cannot see it being 'allowed' to happen for any prolonged period. I think by the definition of a 'contraction of money and credit' we should be experiencing deflation, but as long as policies are tilited towards maintaining the social debt ponzi I think not.

The way I look at it is that although the price of things I don't need (electronic goods, houses) may be dropping, the prices of those I do need (energy, food, insurance, transport costs, education) are still rising. That is inflation, and any reference to that contraction of credit is largely irrelevant in my real-world assessment.

Oh, and we also seem to have entered a twilight zone reality where one billion pounds is no longer a very large sum of money. Sets a quite worring scene in terms of people's perception of the value of money and inflation.

The problem is inflation and as Sentance said, last time that genie was let out of the bottle it took 25 years to put it back in.

:blink:

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Inflation is the only realistic means (beyond long-term responsible, prudent policy) that will erode the debt problem (governments, companies and individuals), so I have no doubt whatsoever that inflation it will be.

I agree. The cuts would have to be too deep and too fast, and I don't think the current - or any - government would have the political strength to see it through. It will be a mix of both, cuts and inflation. And economic stagnation, for many years.

If they cut enough, we will not have hyperinflation, just inflation.

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I think the left are panicking because the lesson of this crisis is that the state is now too big - both here and in the US and Europe.

There is no way back to the heady days of 2007 and the logical conclusion of this is a massive reduction in the state.

And the whole point of Keynesian economics is that governments pay down debt and reduce defecits in boom times so that they can increase debt and defecits in order to fund counter cyclical spending in depressions.

The fact is, you can't have one without the other - governments maxed out the credit cards in the good times and now there is absolutely no escaping the consequences - the only choice is pain now or even more pain slightly later.

Base rates should now be raised 0.25% points each month until they reach between 3.5 - 5% IMO

and if this is not done we risk rapid forced rate rises in the near future in order to combat stagflation.

Good post.

I think you are absolutely right about the left.

Only one thing: I think interest rates should go up more slowly, perhaps 0.25 each quarter.

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Good post.

I think you are absolutely right about the left.

Only one thing: I think interest rates should go up more slowly, perhaps 0.25 each quarter.

Are you sure - it would take 1 year to raise them 1% at that rate?

An increase of 0.25% a month would take base rates to 3.5% by this time next year which seems about right to me

TBH by keeping base rates at 0.5% for so long the BOE has lost control of real interest rates IMO so if the base rate rose, real rates probably wouldn't rise by the same amount anyway.

:)

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But neither is going to happen. All I can promise is a personal commitment to a lifetime of tax avoidance and an ever decreasing social conscience, which is sad really but I just cannot accept current social values nor putting my name behind what is going on as part of any democratic system.

Well actually that's the natural response to 13 years of socialism.

Current social values are unsustainable - a small portion of the population working flat out then having most of what they earn taken off them to pay for people living on benefits and non-job public sector workers.

The answer is big cuts in welfare and the public sector to pay for big tax cuts so that work actually pays.

Sadly this is unlikely to happen.

:(

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Inflation... but of what? Not of wages as far as I can see, and how is that going to reduce anyones debt burden.

I saw the interview. Something I noticed was that when asked about the dreaded 'double dip' it seemed to me he was not saying what he thought. He basically said that at this stage of a recovery typically it can look a bit like this, and that a double dip isn't on the cards. I think 'uneven' might have been the term he used. He was actually shaking his head as he was saying it and looked to me to be a man feeling awkward about saying what he thinks he needs to instead of what he thinks.

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Are you sure - it would take 1 year to raise them 1% at that rate?

An increase of 0.25% a month would take base rates to 3.5% by this time next year which seems about right to me

TBH by keeping base rates at 0.5% for so long the BOE has lost control of real interest rates IMO so if the base rate rose, real rates probably wouldn't rise by the same amount anyway.

:)

Yes I was thinking 1% increase per year.

But that would only be possible if the gov. really did those cuts deep and fast, to stop inflation via fiscal policy. The low rates would help the private sector to grow. The contraction in demand (from the cuts) would help exports. This is the proven orthodox economics solution for this crisis. Reduce domestic demand. We were living well beyond our means.

But I doubt the gov. will manage to cut enough. So, we will have inflation, and IRs will have to go up earlier. Disaster.

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But neither is going to happen. All I can promise is a personal commitment to a lifetime of tax avoidance and an ever decreasing social conscience, which is sad really but I just cannot accept current social values nor putting my name behind what is going on as part of any democratic system.

Understandable. Sadly, the UK gov. has lost legitimacy. Thanks to Labour.

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Yes I was thinking 1% increase per year.

But that would only be possible if the gov. really did those cuts deep and fast, to stop inflation via fiscal policy. The low rates would help the private sector to grow. The contraction in demand (from the cuts) would help exports. This is the proven orthodox economics solution for this crisis. Reduce domestic demand. We were living well beyond our means.

But I doubt the gov. will manage to cut enough. So, we will have inflation, and IRs will have to go up earlier. Disaster.

But inflation is being driven by a weak pound which is due to low interest rates.

And unfortunately an export led recovery can only work if other countries are importing - if all countries are trying to boost their economies by exporting how can this policy work?

Also low interest rates have not stimulated economic activity. Those living off savings ie pensioners can no longer afford to spend and those benefitting ie those with debt have been using low rates to pay down that debt.

In addition if interest rates are low then there is no incentive for banks to lend to businesses that are struggling to survive in a recession because the return is not worth the risk - they might as well hang onto their money and build up their capital base.

Low interest rates clearly have not worked - they have just caused inflation and economic stagnation ( the impending double dip).

:unsure:

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But inflation is being driven by a weak pound which is due to low interest rates.

And unfortunately an export led recovery can only work if other countries are importing - if all countries are trying to boost their economies by exporting how can this policy work?

Also low interest rates have not stimulated economic activity. Those living off savings ie pensioners can no longer afford to spend and those benefitting ie those with debt have been using low rates to pay down that debt.

In addition if interest rates are low then there is no incentive for banks to lend to businesses that are struggling to survive in a recession because the return is not worth the risk - they might as well hang onto their money and build up their capital base.

Low interest rates clearly have not worked - they have just caused inflation and economic stagnation ( the impending double dip).

unsure.gif

Which is why a discussion about rising rates just happens to pop up on Jeff Randal! Rates are going to rise, they are just pacing the sheeple reality IMO.

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Tired of Waiting, on 21 September 2010 - 08:30 PM, said:

Interesting.

Is he living in America? IIRC they have lots of very long term fixed rate mortgages there, even 30 years fixed.

Devon I think his BBC Studio stuff comes from.

Sentance lives in New Hampshire and teaches at Dartmouth College (one of the oldest US universities).

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For inflation to erode the debt, then earnings need to rise, not just commodity prices. It's exactly the same for the Government as it is for the man in the street. If there is no mechanism for the man in the street to get his hands on the cash, then cost inflation will not erode debts, it will make it much harder for them to be repaid. Governments are very good at taking tax from the man in the street, but very bad at taking tax from the rich, so it's debts are not eroded by price increases, it simply makes it more expensive to service the index linked portions of the debt, and more expensive to run government departments.

Low interest rates are hardly helping to stem the credit contraction in the economy. The Government needs to print money to create inflation. We will see if there is the stomach for more QE when CPI has been above upper limit for most of the last 3 years.

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Low interest rates clearly have not worked - they have just caused inflation and economic stagnation ( the impending double dip).

They have worked for the banks. They are stealing money from the public (high margins between lending and saving rates) to cover their casino gambling losses.

Don't forget who owns most of the money sucking black hole that is RBS.

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But inflation is being driven by a weak pound which is due to low interest rates.

I agree, low interest rates is one of the reasons for sterling falling, and this fall is the main source of inflation. That is why the cuts would have to be so deep and fast, to compensate this inflationary pressure, despite a low sterling. This would lead to an "export lead recovery" - the only one possible when you are in debt.

( BTW, this "export lead recovery" just means a surplus in the foreign accounts, but much more likely to be achieved by reducing imports. It just doesn't sound so catchy: "imports reduction lead recovery"... )

And unfortunately an export led recovery can only work if other countries are importing - if all countries are trying to boost their economies by exporting how can this policy work?

I agree again. Sorry. We are in very deep sh!t. But the "solution" of this apparent dilemma is that we are in much deeper sh!t than all other countries (OK, perhaps not as bad as Greece, but that is about it.)

We have no choice. We were living waaaay beyond our means. Our domestic consumption will go down now, whether we like it or not, and by much more than most other countries. And we'll find the bottom in the next few years.

Edit: By the way, these are not a matter of political decision. We just won't be able to keep running both deficits (gov. and foreign accounts) for much longer as we will run out of credit. This will happen. No choice here.

Also low interest rates have not stimulated economic activity. Those living off savings ie pensioners can no longer afford to spend and those benefitting ie those with debt have been using low rates to pay down that debt.

In addition if interest rates are low then there is no incentive for banks to lend to businesses that are struggling to survive in a recession because the return is not worth the risk - they might as well hang onto their money and build up their capital base.

Low interest rates clearly have not worked - they have just caused inflation and economic stagnation ( the impending double dip).

:unsure:

The idea is to channel credit to business, not to consumers. (As we have to import less, and export more.) Regulation should play a part here, restricting mortgages, etc. Domestic consumption will have to go down. Unfortunately. Then again, we were living well beyond our means. It was a bubble, in all areas, totally unsustainable. We are just going to have to land, back down to reality. It will be very hard. It was/ is a huge mess.

Edited by Tired of Waiting

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Sentance lives in New Hampshire and teaches at Dartmouth College (one of the oldest US universities).

Cheers. The question becomes if he does have one of these very common very long term fixed rate mortgages. IIRC, up to 30 years fixed! High inflation would make his mortgage very cheap in a few years.

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Yap...what I have been saying for a while too.

OK...now wait for the assaults from the deflationies and depressioniest.. tick tick tick...

Oh FFS. Its not about what you want to happen, its about what is likely to happen given the situation.

Debt is not increasing - check out M4 etc. Then look to Japan for the answer

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Oh FFS. Its not about what you want to happen, its about what is likely to happen given the situation.

Debt is not increasing - check out M4 etc. Then look to Japan for the answer

This is part of the problem - low interest rates were supposed to stimulate the economy but instead people with debt are using the money to pay it down

Meanwhile people who live off interest from savings are having to spend less hitting demand in the economy

Also, as much of the credit in the system in 2007 came from abroad low interest rates in the UK means a continuing shortage of credit.

Personally I am not opposed to QE if interest rates are raised to stop inflation - which is what Sentance seemed to indicate is likely to happen.

What Blanchflower is proposing is to let inflation rip for a while before getting it back under control somehow which is lunacy in my opinion.

I was mainly interested in the interview because having been told by the 'experts' here that I know nothing - it now seems that my opinions are shared by a highly respected professor of economics who sits on the MPC.

:blink:

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  • 149 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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