Richard Murphy Vs Ross Altman - We Should Not Raise Interest Rate

[easy2012]

http://www.taxresearch.org.uk/Blog/2011/05/18/why-we-dont-need-an-increase-in-interest-rates-now-video/

In Radio 2 program today, there was a talk on inflation between Ross Altman vs Richard Murphy

and Mr Murphy reiterated on his blog that He wants people to have a stable life and stay in their home (even if

they have borrowed irresponsibly...)

Totally disagree with him but then that tells you what how some people are seeing the IR thing... Moral

Hazard should not prevent people from living a good life..

Full exchange on Jeremy Vines show, Radio2 / Iplayer : http://www.bbc.co.uk/programmes/b01132dv

Edited May 18, 2011 by easybetman

[The Knimbies who say No]

http://www.taxresearch.org.uk/Blog/2011/05/18/why-we-dont-need-an-increase-in-interest-rates-now-video/'>http://www.taxresearch.org.uk/Blog/2011/05/18/why-we-dont-need-an-increase-in-interest-rates-now-video/

In Radio 2 program today, there was a talk on inflation between Ross Altman vs Richard Murphy

and Mr Murphy reiterated on his blog that I want people to have stable life and stay in their home (even if

they have borrowed irresponsibly...)

Totally disagree with him but then that tells you what how some people are seeing the IR thing...

yeah, always easier to point to people who will lose their house rather than an those who cannot afford one and whose life is compromised similarly.

Altman is a good 'un in the main, her pieces on pensions make common sense. Although she doesn't say it explicity, she is obviously up for haircuts for existing public sector pensioners to avoid the SHTF. Good.

http://www.telegraph.co.uk/finance/personalfinance/pensions/7651727/Ros-Altmann-What-politicians-must-do-to-stave-off-a-pensions-disaster.html

Murphy seems like the usual sort of comfortable leftie preacher, just watched the vid. Usual BS, his argument is essentially that ~0% interest rates are a brilliant new discovery which solves everything, commodities rising and we cant do anything about that yada yada. Wheres GC when you need him, he'd love it.

http://www.taxresearch.org.uk/Blog/

Edited May 18, 2011 by cheeznbreed

[leicestersq]

http://www.taxresearch.org.uk/Blog/2011/05/18/why-we-dont-need-an-increase-in-interest-rates-now-video/

In Radio 2 program today, there was a talk on inflation between Ross Altman vs Richard Murphy

and Mr Murphy reiterated on his blog that He wants people to have a stable life and stay in their home (even if

they have borrowed irresponsibly...)

Totally disagree with him but then that tells you what how some people are seeing the IR thing... Moral

Hazard should not prevent people from living a good life..

I have to agree with you. He seems to be saying that if you borrow irresponsibly, you should have the right to your home, at the exclusion of the person who was sensible and should have had that home had you both only borrowed what you could afford. That other person has lost out, and the only way that the former person can persist with the home is if the excluded person stumps up and pays for the other person in some way, to stay in that home.

That is just so wrong.

There is no reason to get all moral about this, the issue is simple. Pay your mortgage on time, or lose the home. Courts should evict quickly when the contract is broken, it causes a lot less pain in the long run.

[thecrashingisles]

Judging by his blog the man has blancmange for brains.

This is his latest missive:

We can live with these interest rates for as long as we like – because the gov’t is the best return in town, even at this price. That’s why business is lending them the money. It can’t make as much. It doesn’t know how to make that much.

Long term low rates are vital – as Keynes pointed out

[MrFlibble]

There is no reason to get all moral about this, the issue is simple. Pay your mortgage on time, or lose the home. Courts should evict quickly when the contract is broken, it causes a lot less pain in the long run.

No way, the last thing we want is the market entering a price discovery phase. If that happens the market could well discover that a crappy 2-bed semi made of egg boxes is actually only worth £25k.

[libspero]

We can live with these interest rates for as long as we like – because the gov’t is the best return in town, even at this price. That’s why business is lending them the money. It can’t make as much. It doesn’t know how to make that much.

Absolute rubbish. If business was prepared to lend so much money we would never have needed to print £200bn to prop up government spending and purchase their worthless assets.

The only way I can see that interest rates can stay this low is if real growth remains below 0.5% or we print more money again.

[The Knimbies who say No]

Is this guy supposed to be an academic? Look at the manner in which he fields some comments on the piece:

Jim says:

May 18 2011 at 3:05 pm

Sorry, but I have to disagree with your starting position.

Our economy is frankly based on a fantasy. To suggest that inflation is preferable to facing reality is churlish.

If people have borrowed within their means, then the effects of a controlled increase in interest rates will be absorbed.

Spending will go down, however that spending is currently based on the unsustainable policy of zero interest rates!!! We have to rebalance. The bond market will soon bring us to task when we try to auction our Gilts in a few years.

The people that took on massive leveraged debt in the belief that the UK had somehow reached a new paradigm or that the end of boom and bust was here will be in trouble. So be it.

Extend and pretend is a sure-fire way of following Greece, Portugal, Ireland, Spain and the US down the drain.

The pain of the required deflationary period is NOTHING compared to the harm zero interest rates are causing the UK economy.

Reply

Richard Murphy says:

May 18 2011 at 3:49 pm

Oh no, let’s live in fear of the invisible bond vigilantes!

Let me tell you something – they only exist in your imagination. They’re not even under your bed. We can live with these interest rates for as long as we like – because the gov’t is the best return in town, even at this price. That’s why business is lending them the money. It can’t make as much. It doesn’t know how to make that much.

Long term low rates are vital – as Keynes pointed out

Reply

Al says:

May 18 2011 at 4:36 pm

I wonder how you arrive at the view that irresponsible borrowers should to be helped, even when that help damages those who have directly lost out as a result of the borrower’s actions. By preventing repossessions via low interest rates, those who lost out first time around are again being hard done by. It seems to be completely unfair.

Reply

Richard Murphy says:

May 18 2011 at 5:00 pm

Doers your callousness have no bounds?

http://www.taxresearch.org.uk/Blog/2011/05/18/why-we-dont-need-an-increase-in-interest-rates-now-video/

Edited May 18, 2011 by cheeznbreed

[RentingForever]

Sounds to me that this is one highly-indebted, BTL-portfolio'd, interest-only-mortgaged, MEWed-to-the-eyeballs economist/accountant/blogger/fantasist.

Oops, shame on me. Does my callousness know no bounds?

Edited May 18, 2011 by RentingForever

[easy2012]

Is this guy supposed to be an academic? Look at the manner in which he fields some comments on the piece:

http://www.taxresearch.org.uk/Blog/2011/05/18/why-we-dont-need-an-increase-in-interest-rates-now-video/

I suppose to be a lefties one doesn't need to read up history books .or This Time Is Different: Eight Centuries of Financial Folly by Ken Rogoff....

What is worrying of course he is not alone...

Full exchange on Jeremy Vines show, Radio2 / Iplayer : http://www.bbc.co.uk/programmes/b01132dv

Edited May 18, 2011 by easybetman

[Killer Bunny]

Jeremy Vine has him on regulary. They like him on that show.

He called me f____ng b_____d to my face (before we went on). I said I will never appear with him again

[thecrashingisles]

Jeremy Vine has him on regulary. They like him on that show.

He called me f____ng b_____d to my face (before we went on). I said I will never appear with him again

Sounds like a charming man. I wonder where the bounds of his callousness lie.

[The Knimbies who say No]

Jeremy Vine has him on regulary. They like him on that show.

He called me f____ng b_____d to my face (before we went on). I said I will never appear with him again

Now I get it. I think I mused on a thread a couple of weeks ago about whether or not FP ever pops in to have a read these days. Can't find the thread now but a reply came back which suggested that he may be closer than I think. I didn't twig, apologies KB. Good on you, keep up the Sterling work!

[nmarks]

Jeremy Vine has him on regulary. They like him on that show.

He called me f____ng b_____d to my face (before we went on). I said I will never appear with him again

Murphy sounds like the kind of shill Pravda need to soothe the public: "Nothing to see here, move along, move along"

Shame you didn't tape his baffling expedient and play it back live on air. It would have been interesting to see just how reassured the public felt then.

The era of procrastination, of half-measures, of soothing and baffling expedients, of delays, is coming to its close. In its place we are entering a period of consequences.

Winston Churchill, 1936.

Edited May 19, 2011 by nmarks

[sleepwello'nights]

http://www.taxresearch.org.uk/Blog/2011/05/18/why-we-dont-need-an-increase-in-interest-rates-now-video/

In Radio 2 program today, there was a talk on inflation between Ross Altman vs Richard Murphy

Totally disagree with him but then that tells you what how some people are seeing the IR thing... Moral

Hazard should not prevent people from living a good life..

Much as I disagree with Richard Murphy's views on taxation I find myself agreeing with him on the interest rate argument.

Ross Altman believes that raising UK interest rates will curb domestic inflation. I don't agree it's far too simplistic a view.

Domestic inflation is being caused by increasing commodity prices. Increasing commodity prices are being caused by higher demand from the developing economies in the East. Our interest rates have no effect on that demand. Inflation is caused by under capacity, at the moment there is overcapacity in the UK economy. Raising UK interest rates is the wrong tool for the current situation.

There may be a slight benefit from a slightly stronger exchange rate but I believe any benefit from that will be more than outweighed by the damage that increasing UK interest rates will cause.

I finally twigged what drives the natural rate of interest from an article on the Von Mises institute. It's the price someone is prepared to pay for immediate consumption. When the outlook is optimistic people will pay higher rates, when the outlook is uncertain, like now, people are not prepared to pay a higher price for immediate consumption. Therefore at times like this the natural rate of interest is low.

Edited May 19, 2011 by sleepwello'nights

[Wait & See]

"because if we raise rates those over borrowed will lose their homes"

lol, it's funny how these people think thats not the way things are meant to happen. WTF kind of capitalism do we have this week??

Most talking heads need to be locked up in a mental hospital these days. The UK's gone to hell as no has any common sense anymore.

Edited May 19, 2011 by Wait & See

[The Knimbies who say No]

Much as I disagree with Richard Murphy's views on taxation I find myself agreeing with him on the interest rate argument.

Ross Altman believes that raising UK interest rates will curb domestic inflation. I don't agree it's far too simplistic a view.

Domestic inflation is being caused by increasing commodity prices. Increasing commodity prices are being caused by higher demand from the developing economies in the East. Our interest rates have no effect on that demand. Inflation is caused by under capacity, at the moment there is overcapacity in the UK economy. Raising UK interest rates is the wrong tool for the current situation.

There may be a slight benefit from a slightly stronger exchange rate but I believe any benefit from that will be more than outweighed by the damage that increasing UK interest rates will cause.

I finally twigged what drives the natural rate of interest from an article on the Von Mises institute. It's the price someone is prepared to pay for immediate consumption. When the outlook is optimistic people will pay higher rates, when the outlook is uncertain, like now, people are not prepared to pay a higher price for immediate consumption. Therefore at times like this the natural rate of interest is low.

There's obviously some truth in the developing countries' demand argument but why ignore money printing? FED prints, commodities hit dollar highs, unrelated? UK prints, crude oil hits Sterling high, unrelated? The US can print all they want and the new money will create bubbles in asset prices as it spreads though the economy. However, if we don't print Sterling, the dollar price does not affect us, as the exchange rate picks up the slack.

The 'developing nations' argument is pushed heavily in order to make people believe that there's nowt to be done about the problem of price rises. It's in their interest to perpetuate this myth as inflation (in the QE sense) serves them well; they can buy more stuff with newly printed £ before with wider economy adjusts to the fact that the £ is devalued.

Edited May 19, 2011 by cheeznbreed

[pathfinder]

So it still boils down to saving banks then.

They should have never lent couples more than the (lowest salary + NMW) x 2. Just over that last 2 years we have juggled between high salary + high salary, high salary + no income, JSA + NMW, High salary + no income, soon to be High Salary + NMW. We still pulled through, a friend of ours lost their job. They were 600 quid down a month after bills even with JSA + 26k partner! Still that was 2 years ago, now they want to borrow another 100k to get a bigger house......

Joint income mortgages were the single most evil thing the banks ever did.

[Killer Bunny]

Domestic inflation is being caused by increasing commodity prices. Increasing commodity prices are being caused by higher demand from the developing economies in the East. Our interest rates have no effect on that demand. Inflation is caused by under capacity, at the moment there is overcapacity in the UK economy. Raising UK interest rates is the wrong tool for the current situation.

Commodity inflation is caused by a weak currency. A weak currency is caused by a corrupt govt and central bank which keep IRs lower than they should be - 90% of the time.

Raising our rates will strengteh our currency, lower the cost of imports and wages and house prices. Our std of living would remain UNCHANGED! Yet our prospects would be imemdiately bright. Now we have dreadful prospects, Mr Keynesian.

[easy2012]

Much as I disagree with Richard Murphy's views on taxation I find myself agreeing with him on the interest rate argument.

Ross Altman believes that raising UK interest rates will curb domestic inflation. I don't agree it's far too simplistic a view.

Domestic inflation is being caused by increasing commodity prices. Increasing commodity prices are being caused by higher demand from the developing economies in the East. Our interest rates have no effect on that demand. Inflation is caused by under capacity, at the moment there is overcapacity in the UK economy. Raising UK interest rates is the wrong tool for the current situation.

There may be a slight benefit from a slightly stronger exchange rate but I believe any benefit from that will be more than outweighed by the damage that increasing UK interest rates will cause.

I finally twigged what drives the natural rate of interest from an article on the Von Mises institute. It's the price someone is prepared to pay for immediate consumption. When the outlook is optimistic people will pay higher rates, when the outlook is uncertain, like now, people are not prepared to pay a higher price for immediate consumption. Therefore at times like this the natural rate of interest is low.

I do agree with you that things are not that simple but we are certainly seeing selective prosperity everywhere (the top 20% or so are doing better than ever - this

is where the demand is).

A question for anyone who holds the view that there is no demand - where does the £150bn deficit goes - they don't vanish into the thin air.

Somebody gets these newly minted money and are spending it somewhere (mostly high end shops/services/buildings ( see LandSec report yesterday,

it seemed, however).

[sleepwello'nights]

Commodity inflation is caused by a weak currency. A weak currency is caused by a corrupt govt and central bank which keep IRs lower than they should be - 90% of the time.

Raising our rates will strengteh our currency, lower the cost of imports and wages and house prices. Our std of living would remain UNCHANGED! Yet our prospects would be imemdiately bright. Now we have dreadful prospects, Mr Keynesian.

I think your opinion is blinkered by your views on House Price Inflation to the extent that you disregard all other facets of the complications that are faced by the global economy.

QE will cause inflation, no question, but is the cure worse than the illness?

[Wol]

QE will cause inflation, no question, but is the cure worse than the illness?

Yes. Central banks have almost no control where that extra money goes. The people who need it most are usually the least creditworthy so it never gets to them. Instead, it ends up in stocks and commodities. You can see this in nearly all charts since 2008.

[Killer Bunny]

I think your opinion is blinkered by your views on House Price Inflation to the extent that you disregard all other facets of the complications that are faced by the global economy.

QE will cause inflation, no question, but is the cure worse than the illness?

You think wrongly sir and insultingly (to my intelligence and analytical ability).

The cure is the cure. The illness is the illness. How can a palliative ever be useful? Wake up!

[Democorruptcy]

Much as I disagree with Richard Murphy's views on taxation I find myself agreeing with him on the interest rate argument.

Ross Altman believes that raising UK interest rates will curb domestic inflation. I don't agree it's far too simplistic a view.

Domestic inflation is being caused by increasing commodity prices. Increasing commodity prices are being caused by higher demand from the developing economies in the East. Our interest rates have no effect on that demand. Inflation is caused by under capacity, at the moment there is overcapacity in the UK economy. Raising UK interest rates is the wrong tool for the current situation.

There may be a slight benefit from a slightly stronger exchange rate but I believe any benefit from that will be more than outweighed by the damage that increasing UK interest rates will cause.

I finally twigged what drives the natural rate of interest from an article on the Von Mises institute. It's the price someone is prepared to pay for immediate consumption. When the outlook is optimistic people will pay higher rates, when the outlook is uncertain, like now, people are not prepared to pay a higher price for immediate consumption. Therefore at times like this the natural rate of interest is low.

Higher commodity prices are caused by QE flooding the world with money. It's speculative money exiting cash.

We need foreign investment but who is going to invest in a country with a weak currency? Our interest rate policy is shining at them like a flashing red light "Don't invest here"

[Wol]

Jeremy Vine has him on regulary. They like him on that show.

He called me f____ng b_____d to my face (before we went on). I said I will never appear with him again

KB, I think you did the right thing.

[okaycuckoo]

Does Murphy post on here?

I remember someone posting a pattern of accusations of callousness on some thread about repos - just reminded me of his comments on his blog.