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Time to raise the rents.

Missed The Article Of The Day Again.....

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Threads today:

Stock market crash on monday.

Jobs going to hell

Forced sales Blah blah

State of the Nation....

But why isn't this article discussed or mentioned? Not good enough for the doom & gloom menu?

Hint on the contents, growth is just as important as inflation (even much more important IMO).

http://business.timesonline.co.uk/article/...1820711,00.html

COMMENT

Brown should bank on a change of approach

Andrew Ellson says changes to the world economy mean it could be time for the Bank of England to worry more about growth than inflation

Every year Gordon Brown, the Chancellor of the Exchequer, sends a letter to the Bank of England governor Mervyn King. In it he outlines the policy objectives he wishes the Bank’s Monetary Policy Committee to pursue with their control of interest rates.

The last letter was sent in March this year and clearly stated that the MPC’s principal task was to maintain price stability. The Chancellor set the inflation target at 2.0 per cent. Secondly and subject to achieving this objective, the Chancellor also instructed the MPC to support the Government’s economic policy of achieving "high and stable levels of growth".

The MPC, quite rightly, has followed these instructions to the word – inflation although marginally above the 2.0 per cent target is not out of control - but the result has been economic stagnation and three consecutive quarters of below trend growth. Annual GDP growth in the second quarter fell to 1.5 per cent - its lowest level in 12 years.

So could it be time for the Chancellor to re-order the remit of the MPC? Or at least place growth, which ultimately leads to jobs and prosperity, as an equal priority to price stability? There is a compelling case.

Firstly, you just have to look to the relative performance of the American and eurozone economies. In America, where growth has averaged almost 4 per cent over the last few years, the Federal Reserve has been very responsive to changes in economic conditions and used interest rates as a tool to manage growth.

It has altered the cost of borrowing more than 30 times since the year 2000 – at one stage reducing rates to as low as 1 per cent to stimulate the economy.

In contrast, the eurozone has consistently suffered growth of below 2.0 per cent but the European Central Bank (ECB) has only changed interest rates 12 times in the last five years. And borrowing costs have not budged since mid 2003.

Of course, the rigidity of the "one size fits all" economics of the euro have constrained the ECB and rates alone are not enough to stimulate growth – particularly in the face of excessive regulation and belligerent politicians – but it is the pointless obsession with inflation that has been the ECB’s real handicap.

This is undoubtedly a hangover from the days of the once-mighty German Bundesbank, the officials of which still dominate the ECB. The monetary prudence of the Bundesbank kept inflation in check in the 1980s and early 1990s – an achievement never mirrored in the UK.

But times have changed – there have been seismic shifts in the nature of the global economy that have reduced the extent of the inflation threat and the US Federal Reserve appears to have understood this while the ECB has not.

Globalisation has made the world a more competitive place and has driven down prices. The rise of China as not just a cheap but an efficient manufacturer of every type of consumable good has made shopping cheaper. A DVD player now costs a fraction of what it did five years ago. And despite the protectionist efforts of the EU clothes prices are also falling as cheap textiles flood in from the Far East.

But it is not just the price of consumer goods that is falling. The much-maligned offshoring of back office work, such as call centres and administration, has helped to subdue inflation by making services cheaper.

Even spiralling oil prices – which undoubtedly threaten to edge inflation higher – will not trigger the sort of price rises seen in previous decades because the developed economies of America, Britain and Europe are relatively much less dependent on the black stuff than before. This is particularly the case in the UK where manufacturing has shrunk to account for just 20 per cent of the economy.

So in his next letter to Mr King the Chancellor should politely ask the Bank of England to continue maintaining stabile prices but not to forget that growth is just as important too.

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I wondered where you'd got to. Must have been waiting ages for a bullish article to spring on us.

The simple answer is, if the BoE abandons any pretence at controlling inflation, the pound won't be worth scraping your ass with... it's not far from that already, even with King's bearish pronouncements earlier this week.

So in his next letter to Mr King the Chancellor should politely ask the Bank of England to continue maintaining stabile prices but not to forget that growth is just as important too.

Back in reality land, we're now heading into stagflation, where doing both is impossible.

Edited by MarkG

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First of all, there's nothing doom and gloom about HPC. Every bearish article I read fills me with joy. Ones like this one are few and far between these days.

But why not go for growth as TTRTR seems to be suggesting? Because inflation destroys economies. TTR might want to look at yesterday's article in the Torygraph (it's in the news blog) suggesting that the price of the Fed's 1% interest holiday was a housing bubble, rampant debt, a balance of payments crisis in waiting and creeping inflation. The pound is going on a slide and if the BOE cut rates that'll get worse meaning that - yes that's right - we import inflation.

The options are recession now or recession later. If we wait it'll be worse.

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I am all for balance but that article is why we should be worried - if we need to stimulate growth so badly then how can all be well? If we do so by fuelling more debt and cheaper, easier money by cutting rates, we fuel inflation further and the pound falls and cost of imported goods goes up, more inflation etc (a nasty spiral in fact)

The bottom line is that interest rates cannot alone influence the myriad complexities of the global economy (witness the difference in rates around the golbe over the years) and to pretend that the simple tool of rate changes is the only monetary policy control/lever which can facilitate/promote growth is naive.

Nice to have TTRTR back as we need balance.

I think even hardened HPCers from the early days have been taken aback at the increased pace of the downward shift in UK and world sentiment on economic health and real estate pricing over the last 3-6 months. In terms of HPC, having thought we might never get there earlier this year, we are 6 months ahead of where I thought we might be in my wildest dreams.

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Of course, the rigidity of the "one size fits all" economics of the euro have constrained the ECB and rates alone are not enough to stimulate growth – particularly in the face of excessive regulation and belligerent politicians – but it is the pointless obsession with inflation that has been the ECB’s real handicap.

If the ECB want the euro to wrestle the title of world's reserve currency away from the dollar then long term price stability at the expense of short term growth is the way to show potential holders of the currency that their savings will no be inflated away as the US appears to be trying to do. I don't suppose China feel particularly comfortable with rampant $ inflation inflating away their TB stash, and the message the ECB is putting out is your savings will be safe with us.

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So could it be time for the Chancellor to re-order the remit of the MPC? Or at least place growth, which ultimately leads to jobs and prosperity, as an equal priority to price stability? There is a compelling case.

:lol:

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If the ECB want the euro to wrestle the title of world's reserve currency away from the dollar then long term price stability at the expense of short term growth is the way to show potential holders of the currency that their savings will no be inflated away as the US appears to be trying to do.

Indeed. It's a shame, though, that the ECB has been such a dismal failure at controlling inflation: just look at Irish housing, for example.

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[the Fed] has altered the cost of borrowing more than 30 times since the year 2000 – at one stage reducing rates to as low as 1 per cent to stimulate the economy.

But there are clear signs in the air that central bankers are reconsidering the wisdom of such monetary policy activism.

In Mervyn's speech earlier this week, he made a big deal about how the Bank's job was to focus on inflation and not to try to keep the economy growing at a steady rate. This wasn't just a reference to the mandate set by Brown, but an argument that using monetary policy for such purposes is likely to have undesirable consequences, and in the long run be self defeating.

Greenspan's recent pronouncements show that he too may be having doubts about having cut interest rates so low to stave off any signs of recession. He has admitted that the policy may have had destabilising effects on asset prices (you don't say!), and he's now having to raise interest rates fairly rapidly to head off the inflationary consequences.

In particular, Mervyn noted the danger of using monetary policy to try to offset short-term problems caused by supply-side factors. Using the example of oil prices, he said they mean that

"The purchasing power of wages and salaries must grow more slowly than would otherwise have been possible, by around 1-2% in the major industrialised countries, spread over a couple of years."

Central banks have to recognise when a downturn in growth might be because of such factors, and resist cutting interest rates to compensate. When the problem is supply-side, lower rates might stimulate growth in the short run, but in the longer term rising inflation would require tighter monetary policy and the risk of an overcorrection causing a recession.

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Threads today:

Stock market crash on monday.

Jobs going to hell

Forced sales Blah blah

State of the Nation....

But why isn't this article discussed or mentioned? Not good enough for the doom & gloom menu?

I'm sure it wasn't intentional, but lets face it, there's so much to choose from!

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Well my existing anecdotal still stands. I can't find a desperate seller to take my low offers in SW11.

Haven't you upped your offers yet?

I thought you would have had somewhere in the bag by now, given you told us all last December was the best time to buy otherwise we'd miss the boat... etc, etc.

As for the article, I'm genuinely surprised that you consider this to be positive.

The guy is saying that our economy is slowing rapidly.

And he is arguing our central bankers, who have done an excellent job of rebuilding the UK's reputation for monetary fortitude (perhaps you don't remember, since you were not in the country at the time, what an utter laughing stock the UK's monetary authorities were back in the early 1990s), now take their eye off the ball and look to boost growth at the expense of inflation (and their monetary reputation).

I can see this would be good news for BTLs in the short term (I told BBB to "pray for inflation" about a year ago) but WHY is it good news for Britain?

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The only thing that Gordon wants is growth in the money supply to pay for his clapped out economic mismanagement of the economy.

Time to see if Mervyn is a man or a mouse.

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Time to see if Mervyn is a man or a mouse.

Indeed. We desperately need a rate increase to prove that the BoE hasn't totally lost its marbles... otherwise the pound is going to continue sinking.

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Well my existing anecdotal still stands. I can't find a desperate seller to take my low offers in SW11.

They can't be over valued, surely? Didn't you hear, prices only ever go up, they will be 80% higher by 2010, why would somebody accept your low offers when prices are still rising in London, I've just heard from my reality defying talking cat that things only ever go up, he's telling me that Australia is cheap too!

Magic Talking Cat also says a small 2 bed terrace will cost £1m in a couple of years, he puts this down to demand, an influx of "young professionals" and economic migrants, both of which instantly start on a £120k wage even in the darkest backwaters of these islands.

Magic cat also likes new luxury apartments, but I think he just likes playing with the cardboard walls to be honest!

Edited by BuyingBear

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Guest Riser

Indeed. We desperately need a rate increase to prove that the BoE hasn't totally lost its marbles... otherwise the pound is going to continue sinking.

Is this a sign of things to come in the next UK CPI figures :blink:

U.S. Consumer Prices Rise Most in 25 Years; Core 0.1%

Oct. 14 (Bloomberg) -- U.S. consumer prices rose last month by the most in 25 years as energy costs posted the biggest jump on record after Hurricanes Katrina and Rita. Excluding energy and food, prices rose less than forecast

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don't normally like directly quoting whole posts but this one is so good and apt i'm doing it now

Quote ...from .''Marina'' this morning..............................

''Being hurt in these unpredicatable times is inevitable. Those of us who saw this coming several years ago always knew it was going to be accompanied by a recession - and that it would be a bad one.

There will be, to use that charming expression now used about wars, collateral damage. No-one will be immune (apart from a lot of public sector workers of course).

You need to blame this government. It is obvious that our economic 'success' was built on debt and spiralling house prices. This was obvious as long ago as 2002. But the tossers were happy to preside over 50 year low interest rates and watch the country borrow its way into slavery - all to keep an illusion going that all was well.

The biggest recession and slump since the 1930s will soon be upon us - and this current government are to blame for it. The public sector has become a monster gobbling up ever-increasing tax revenues. This will be an ongoing drain on the economy for generations - it's easy to employ an extra million people - not so easy to get rid of them''

Edited by Michael

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don't normally like directly quoting whole posts but this one is so good and apt i'm doing it now

Quote ...from .''Marina'' this morning..............................

''Being hurt in these unpredicatable times is inevitable. Those of us who saw this coming several years ago always knew it was going to be accompanied by a recession - and that it would be a bad one.

There will be, to use that charming expression now used about wars, collateral damage. No-one will be immune (apart from a lot of public sector workers of course).

You need to blame this government. It is obvious that our economic 'success' was built on debt and spiralling house prices. This was obvious as long ago as 2002. But the tossers were happy to preside over 50 year low interest rates and watch the country borrow its way into slavery - all to keep an illusion going that all was well.

The biggest recession and slump since the 1930s will soon be upon us - and this current government are to blame for it. The public sector has become a monster gobbling up ever-increasing tax revenues. This will be an ongoing drain on the economy for generations - it's easy to employ an extra million people - not so''

Indeed, and it certainly amply qualifies marina for the cherished HPC Apocalyt of the Week award. Well done marina! Assuming we are all still here, who will win it next week?

Edited by BoredTrainBuilder

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I always thought the whole point of using IR to control inflation was to set up a steady platform for the economy to perform on. Of course being able to control growth would be an ideal, if say for example you could say that the BOE remit was for 4% growth a year. Of course we all know thats crap so all the BOE can and should do is control what it has got some power over e.g. Inflation.

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I think all the posts replying to TTRTR needs to actully understand his position.

I have no doubt he is making money, he is also concerned about the market, and also has the brains to keep his eye on here also.

I honestly dont think TTRTR needs house prices to rise, and i dont think he needs/wants them to the crash either.

People need to stop biting to his posts and actully understand some of the mild sarcasm in his posts along with some facts which actully benifit him.

The guy is not an idiot and no matter how chaotic some of his replys to recent news may be, hes made money, and i suspect hes actully used his brains to do it... and he aint just going to ignore what the facts are right infront of his nose.

If any recent news was gonna affect him dramatically i suspect he would do whats neccessary.

Anyway, thats the first and last bit of mild ass kissing ill post in TTRTR's favour!, I just thought id post something different to the usual "I SAW 30 HOUSES FOR SALE ON THE WAY TO WORK TODAY!!" reply.

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hes made money, and i suspect hes actully used his brains to do it

Does being (or at least implying in his previous postings that he is) a slumlord really count as 'using your brains' these day?

If so, it's no wonder this country is in such a mess. Frankly, it's also no surprise to me that no-one wants to sell to him.

Edited by MarkG

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Guest Charlie The Tramp

Hi TTRTR,

Did you miss the article in The Weekend Australian, comments by the RBA, very interesting.

Reserve Bank Of Australia Fears Global Meltdown

And surely you listened to John Humphrys giving Gordon Brown a good kicking yesterday on Radio 4.

He really hit the nail on the head with his Economy, consumer led, fuelled by debt, and housing inflation.

As my signature says a real Potemkin Economy.

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  • 302 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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