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Carney Urged By Former Chancellor To Ditch Qe


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The bottom line is that if the voting public is pissed off with the way the country is being run then they vote out the party in power, because that is all they can do to register their dissatisfaction. Finger pointing exercises are pretty much lost on them.

Older homeowners have a lot less to be p*'d off with, in so many parts of the country.

Time has come to run with policies which aren't voter friendly, but which are essential anyway. Even if it means being tough on those who 'only wanted a home' with giant mortgages, believed media/parents ect that it doubles every few years, and over-paid boom created jobs they thought would be maintained forever. Conservatives got re-elected in the early 90s having followed policies which lowered house prices and shook out the over-indebted.

Yes it might be good this time around, for an outsider, Carney, to take the heat off Government if pushing through tough measures. Better that than 'no-tough', with all the pain continuing to fall on younger non-owning savers, with promises of Shared Ownership at mega inflated prices.

The hard truth, he added, was that British households had borrowed too much during the years before the credit crisis and now had to pay it off.
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Don't we all seek second opinions from informed authorities on major issues?

Asking for their view is fair enough.

Indeed. It's quite usual to seek second opinions on major issues.

I'm sure you already know that handing over "independence" on interest rates to the BoE wasn't just a Labour idea/inspiration developed by them in their years out of power and then suddenly announced when they won the 1997 general election. Although at the time it was presented a bit like that by the various media.

It was something that had been in the pipeline for at least most of the 90s under the Conservatives and it was reported in those days that the BoE's view was being given far more weight than had previously been the case - and likely the BoE put more effort into forming their view on the basis that it would have more weight.

Before then it's very likely that the BoE was still allowed an opinion but the government's own opinion had more weight and held sway but the government had been unable to control inflation because their decisions on interest rates tended to be influenced by election issues (boom and bust).

The BoE having more input would sort that out - just like the Bundesbank Central Bank did for Germany. Or at least that's the way it had been reported.

All parties seem to have thought it was a good idea although Labour took most credit for it as they made it official - where credit was due.

They were all in it together as it were - including the LibDems.

However as things have turned out (the BoE's evident general incompetence along with massive inflation in essentials, inflation indices continually changed and and their constituents manipulated and the inflation target dumped etc etc since the outset) an idea that at one time seemed to have a valid basis has evidently been nothing more than a blame shifting manouevre.

Edited by billybong
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Older homeowners have a lot less to be p*'d off with, in so many parts of the country.

Time has come to run with policies which aren't voter friendly, but which are essential anyway. Even if it means being tough on those who 'only wanted a home' with giant mortgages, believed media/parents ect that it doubles every few years, and over-paid boom created jobs they thought would be maintained forever. Conservatives got re-elected in the early 90s having followed policies which lowered house prices and shook out the over-indebted.

Yes it might be good this time around, for an outsider, Carney, to take the heat off Government if pushing through tough measures. Better that than 'no-tough', with all the pain continuing to fall on younger non-owning savers, with promises of Shared Ownership at mega inflated prices.

It doesn't matter whether they have reason to be pissed off or not. It only matters what they feel. They could have had massive HPI and be sitting on a huge asset but if Osbourne cut the pension by £10 before the election all that would go out the window. People only see what is in front of their faces. The hpi is "banked".

I think the idea that tough measures will be pushed through 2 years before an election is just a non starter. The tories can see the home straight now. Taking pain at this point would be suicidal. The time to put in tough measures is straight after you have been elected, so there is a finite chance that they will be forgotten or the situation will improve by the end of 5 years. They will only take tough measures when they are forced to by the market, or it becomes hugely obvious to them that they have no chance of doing otherwise. I think the recent issue with bond hikes has been a big wake up call for them, but the bottom line is that what happens here is completely out of their control. If the Yanks keep rates low they will do the same and try to keep the plates spinning until the next election. If the Yanks hike the rates then they will have to do the same, then they will either try to plant the blame on someone else or claim that this is the "prudent way to operate" to try to deflect the flak.

I maintain that the best chance of HPC in the UK is a strong recovery in the US economy, and I will continue to cheer every time this is indicated.

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Wasnt that the 'lawson boom', not the 'lamont boom'?

To be fair to Lamont, he inherited a crappy situation from Major and left a good one for Clarke. Just as Brown got lucky with timing as chancellor, Lamont got unlucky.

Good or bad? Lucky or unlucky? This Pinochet lover was rewarded with the obligatory enoblement.

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Indeed. It's quite usual to seek second opinions on major issues.

I'm sure you already know that handing over "independence" on interest rates to the BoE wasn't just a Labour idea/inspiration developed by them in their years out of power and then suddenly announced when they won the 1997 general election. Although at the time it was presented a bit like that by the various media.

It was something that had been in the pipeline for at least most of the 90s under the Conservatives and it was reported in those days that the BoE's view was being given far more weight than had previously been the case - and likely the BoE put more effort into forming their view on the basis that it would have more weight.

Before then it's very likely that the BoE was still allowed an opinion but the government's own opinion had more weight and held sway but the government had been unable to control inflation because their decisions on interest rates tended to be influenced by election issues (boom and bust)

My answer would be I do not know all the details from back then, for relationships between the Treasury and the BoE. It seems to me a the Treasury was suspicious of the BoE until around late 1992 - probably in the knowledge that hard-academics tend to overlook real world consequences in their plotting and planning, often too isolated from the cut and thrust of what the real world and markets are actually like. Things like markets should have morals, and being angry with banks post credit-crunch for not lending anymore, lol.

A wounded ERM Lamont was swayed by Merv's sell of inflation targeting, around late 1992, and gradually accepted some of their findings, but only as of 1997, Labour embracing it fully, but in a tripartite system.

Sir Mervyn joined the BoE as chief economist in 1991 from the London School of Economics, intending to stay at most for two years. His big break came with the sterling crisis of 1992, when the pound was forced out of the European exchange rate mechanism. Britain needed a new economic framework and Sir Mervyn was on hand to offer the Treasury inflation targeting. It was the new fashion that sought to use interest rates to keep inflation at a specific level rather than seeking to control it through pegging sterling to other currencies or seeking, 1980s-style, to control the amount of money in circulation.

Once Lord Lamont, then chancellor, accepted Sir Mervyn’s advice, the centre of gravity in British economic policy-making began to shift. The Treasury traditionally looked down on BoE staff’s intellectual heft, but by 1997 Sir Mervyn had transformed economic thinking and made the Bank academically superior.

“He showed very strong leadership in his stewardship of monetary analysis, the inflation report, the professionalisation of BoE economists and the single-minded focus on the inflation target,” says Danny Gabay, who was a staff member at the time.

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It doesn't matter whether they have reason to be pissed off or not. It only matters what they feel. They could have had massive HPI and be sitting on a huge asset but if Osbourne cut the pension by £10 before the election all that would go out the window. People only see what is in front of their faces. The hpi is "banked".

I think the idea that tough measures will be pushed through 2 years before an election is just a non starter. The tories can see the home straight now. Taking pain at this point would be suicidal. The time to put in tough measures is straight after you have been elected, so there is a finite chance that they will be forgotten or the situation will improve by the end of 5 years. They will only take tough measures when they are forced to by the market, or it becomes hugely obvious to them that they have no chance of doing otherwise. I think the recent issue with bond hikes has been a big wake up call for them, but the bottom line is that what happens here is completely out of their control. If the Yanks keep rates low they will do the same and try to keep the plates spinning until the next election. If the Yanks hike the rates then they will have to do the same, then they will either try to plant the blame on someone else or claim that this is the "prudent way to operate" to try to deflect the flak.

I maintain that the best chance of HPC in the UK is a strong recovery in the US economy, and I will continue to cheer every time this is indicated.

Banked hehe. There is some hope with many older home-owners not overly bothered with what their homes are worth, having not Bomad, and wanting opportunity for younger people. Many will die in their homes, and still the same home to them whether worth £500K or £200K.

So perhaps if much of their pensions are maintained, but some of the freebies have to be curtailed, perhaps including means-tested winter fuel allowance.

Also all parties are going to have to offer fewer voter friendly rewards. The realities of the situation can't be wished away, unless they are dishonest in spindoctoring with the lust for power at all costs, in their campaigning for election.

Maybe re the USA, bringing the pain on the UK and others. Not sure about US recovery as such, but just that they're the least unhealthy beast out there in Western economies + firepower + tech + natural resources. Less likely than UK to be fretting over power outages, or running out of gas, for their businesses in the near future.

Telegraph or similar headline of the other day, and covered in a thread begun by TMT, and you can include me in for Conservatives having lost my vote, unless some measures are taken towards shaking out BTLers and the over-indebted near future.

A generation of young families in rented properties could turn away from the Conservative Party, experts warned tonight, after new home ownership figures signalled the end of Margaret Thatcher’s housing legacy.
The private rented sector has grown by 72 per cent since 2001 and there are now over nine million people in England renting privately. The renting population has also changed. A third of renting households are families with children, and half of households renting are 35 or older.
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A series of senior Tories, including Baroness Shephard and former Chancellor Norman Lamont, challenged Mr King about the soaring level of personal debt. They argued that many families owed vast sums and that the authorities had a responsibility to take action before the problem became worse.

Mr King said the situation was being monitored by the Bank of England and was under control.

"The vast majority of the debt is secured against a property and it would be of concern only if that was not the case," he argued.

It's almost a laugh if it weren't so serious.

Gillian Shephard was able to see the risks but King who had been at the BoE all those years was oblivious to them and took no notice and ignored her good advice(and Lamont's as well as a few others). It's just a shame they didn't present much opposition in Parliament.

"Under control" :rolleyes:

"The vast majority of the debt is secured against a property and it would be of concern only if that was not the case," :rolleyes:

Admittedly she'd been a Minister of State at the Treasury for a couple of years but nothing compared to Mervyn's length of time/tenure at the BoE.

Mind you she was a director of Coventry Building Society when she "challenged" him.

It looks more and more as if King just rode the trend wave of low inflation from the early 90s and the politicians were happy for him/the BoE to be seen as being responsible. When the trend became choppy then the emperor's lack of clothing became evident.

It will be interesting to see what trends Carney will have to ride. From the early indications it sounds as if he wants to make up his own rules (they all do) but that could be even more devastating for the UK than King's time.

Edited by billybong
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It would be very worrying if the bofe stopped focusing on inflation and turned its sights to growth, the growth would go to the wrong places and into the wrong hands, the gap between the haves and have nots will widen ever further fuelling high inflation using printed and borrowed money that only the few would have access to and they would see to it it stayed that way, that is why they ask for it....... ;)

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It's hard to get context, but I'll embrace it anyway. Hopefully it will make existing debtors/borrowers cautious as well.

Offers more hope than King's 'baby boomers done very well from housing, but we must think of those in their 40s who over-borrowed, so no chance of interest rate rises any time soon."

Question put to Governor Mark Carney.

Qu: In many countries we're up to our eyes in debt, in the UK it's about

5 times the size of the economy. Are you concerned that even a slight

rise in interest rates may push some home-owners, some businesses

and some banks over the edge?

"Without doubt," he told ITV News, "[they] need to manage their business for the possibility of a slight or material change in the level of interest rates," ...as well as other investments.

The video is here: http://www.itv.com/n...interest-rates/

Canadian Mark Carney, who takes over from Sir Mervyn King on Monday, told ITV News a rise was on the cards, adding: 'Without doubt they need to manage their business for the possibility of a slight or material change in the level of interest rates.'

http://www.dailymail...o=feeds-newsxml

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It's hard to get context, but I'll embrace it anyway. Hopefully it will make existing debtors/borrowers cautious as well.

Offers more hope than King's 'baby boomers done very well from housing, but we must think of those in their 40s who over-borrowed, so no chance of interest rate rises any time soon."

Question put to Governor Mark Carney.

Qu: In many countries we're up to our eyes in debt, in the UK it's about

5 times the size of the economy. Are you concerned that even a slight

rise in interest rates may push some home-owners, some businesses

and some banks over the edge?

The video is here: http://www.itv.com/n...interest-rates/

http://www.dailymail...o=feeds-newsxml

It's hard to read all this Sir-Humphreyesque ambiguity which must be primarily designed to rule nothing out rather than indicate a preferred course. I really hope rates start moving norf though, whether by Carney's hand or other external factors as seen in US rates on another thread.

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From he daily Mail link

http://

www.dailymail.co.uk/news/article-2348576/Mark-Carney-Get-ready-mortgage-rate-rise.html?ito=feeds-newsxml

Sir Mervyn, who retires after ten years as governor, told MPs on the Treasury Select Committee: ‘It is clearly the case that with the prospect at some point down the road of higher interest rates it is not sensible to be in a highly indebted position.’

He said some in their thirties and forties had unmanageably large mortgages and would struggle if interest rates rose.

Sir Mervyn used his final public appearance to warn that they some of them had not taken advantage of low borrowing levels to pay off mortgages, instead amassing dangerous levels of debt.

He said the some of the baby-boom generation had benefited from a steady rise in house prices, but this had forced their some of their children to borrow beyond their means to get on the property ladder.

Sir Mervyn added that this meant some of those in their thirties and forties would be left in an ‘unsustainable’ position if interest rates hit 3 or 4 per cent

Just saying - to emphasise that it's far from every single individual in the categories he refers to.

Edited by billybong
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Again from the Daily Mail link

http://

www.dailymail.co.uk/news/article-2348576/Mark-Carney-Get-ready-mortgage-rate-rise.html?ito=feeds-newsxml

New Bank governor says get ready for higher interest rates

Canadian Mark Carney said businesses should prepare for 'slight or material change' in the level of interest rates

Outgoing governor Sir Mervyn King said increases a long way off

.....

Deputy governor Charlie Bean suggested rates could actually be cut to minus figures to stimulate growth.

Rates will go up, stay the same or go down. It's beyond farce and it's no way to run a country.

By all means give Carney the job as governor if they have to, somebody has to choose who does the job of governor - but the BoE has given enough proof already that it's not fit for purpose.

Edited by billybong
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It's hard to get context, but I'll embrace it anyway. Hopefully it will make existing debtors/borrowers cautious as well.

Offers more hope than King's 'baby boomers done very well from housing, but we must think of those in their 40s who over-borrowed, so no chance of interest rate rises any time soon."

Question put to Governor Mark Carney.

Qu: In many countries we're up to our eyes in debt, in the UK it's about

5 times the size of the economy. Are you concerned that even a slight

rise in interest rates may push some home-owners, some businesses

and some banks over the edge?

The video is here: http://www.itv.com/n...interest-rates/

http://www.dailymail...o=feeds-newsxml

Carney is bluffing, he's trying to talk down inflation without having to raise rates. King has done the same thing on a number of occasions.

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Again from the Daily Mail link

Rates will go up, stay the same or go down. It's beyond farce and it's no way to run a country.

Three make-believe scientists giving their opinion about a make-believe recovery. About as close to random as it's possible to get.

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The problem in 2008 was far too many banks that were far too big with far too many risky assets, holding too little capital.

The taxpayer has been forced to re-capitalise the entire banking sector, every single mother fcking bank in the world. Practically every single one. Including all the banks that officially *ahem* didn't take taxpayers money but still require $85 billion a month of asset purchases from the fed alone to stop them collectively shitting their pants.

Barclays is threatening to cut off business lending because the BOE want them to hold 3%, yes 3%, in capital which would still allow them to hold 33x that in assets.

So we really haven't solved the central problem in 2008.

Banks remain essentially deregulated. There are far too many of them. Far too many are still dependent on state support. Personal debt has barely improved, business lending is down, base rates remain too low for a sensible functioning banking sector and asset prices still cling tenuously on the precipice through extraordinary state intervention in the market.

State spending on re-capatalising an industry that needs to be a good 40% smaller has gone beyond silly into the realms of cuckoo and on into loony la la land.

Far better, I believe, that as soon as the pipes had been unclogged through the initial tranche of QE, that we begin the process of shutting down zombie banks (a good 40% should have gone in Europe), let bad banks fail, allow others banks to absorb the good portion of the banks, break up the behemoths (Barclays alone retains a gross asset risk book that would sink the British economy) and re-capatalise the much smaller regulated banking community.

The smaller banks, separated from the casino arm would be forced to return to core business, which is responsible lending, and this would/could have been supplemented with public money (possibly QE) directly injected into the economy.

We could normalise much quicker, have a quicker proper recession that cleans out bad loans in the economy and keeps taxpayers money going where it is supposed to go, supporting the wider economy, not a few code staff.

Banks should have been allowed to fail. We have just kicked the can down the road and the next financial crisis, and you know that the next one is already swelling in the belly, and we have no protection from it. Even the stupid, watered down, ineffective and laughable Vickers recommendations don't start until 2019.

Next time they won't bother with QE and financial repression, they will just go straight to the savers accounts and access the money there.

It's happening already.

Sorry if I'm ranting. I get really cross about it.

Edited by beccles
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The problem in 2008 was far too many banks that were far too big with far too many risky assets, holding too little capital.

The taxpayer has been forced to re-capitalise the entire banking sector, every single mother fcking bank in the world. Practically every single one. Including all the banks that officially *ahem* didn't take taxpayers money but still require $85 billion a month of asset purchases from the fed alone to stop them collectively shitting their pants.

Barclays is threatening to cut off business lending because the BOE want them to hold 3%, yes 3%, in capital which would still allow them to hold 33x that in assets.

So we really haven't solved the central problem in 2008.

Banks remain essentially deregulated. There are far too many of them. Far too many are still dependent on state support. Personal debt has barely improved, business lending is down, base rates remain too low for a sensible functioning banking sector and asset prices still cling tenuously on the precipice through extraordinary state intervention in the market.

State spending on re-capatalising an industry that needs to be a good 40% smaller has gone beyond silly into the realms of cuckoo and on into loony la la land.

Far better, I believe, that as soon as the pipes had been unclogged through the initial tranche of QE, that we begin the process of shutting down zombie banks (a good 40% should have gone in Europe), let bad banks fail, allow others banks to absorb the good portion of the banks, break up the behemoths (Barclays alone retains a gross asset risk book that would sink the British economy) and re-capatalise the much smaller regulated banking community.

The smaller banks, separated from the casino arm would be forced to return to core business, which is responsible lending, and this would/could have been supplemented with public money (possibly QE) directly injected into the economy.

We could normalise much quicker, have a quicker proper recession that cleans out bad loans in the economy and keeps taxpayers money going where it is supposed to go, supporting the wider economy, not a few code staff.

Banks should have been allowed to fail. We have just kicked the can down the road and the next financial crisis, and you know that the next one is already swelling in the belly, and we have no protection from it. Even the stupid, watered down, ineffective and laughable Vickers recommendations don't start until 2019.

Next time they won't bother with QE and financial repression, they will just go straight to the savers accounts and access the money there.

It's happening already.

Sorry if I'm ranting. I get really cross about it.

+1 :angry::angry:

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Next time they won't bother with QE and financial repression, they will just go straight to the savers accounts and access the money there.

It's happening already.

Sorry if I'm ranting. I get really cross about it.

The trouble is the money system doesn't work the way we want it to.

It would be nice if a company could be profitable with out private debt increasing but for every pound a company makes in profit some one has to borrow that pound.

After years of having companies stick their profits into a bank and the public borrowing that profit we end up with all the money on one side of the balance sheet and there is no way the general public can pay back their debts unless this money is released back into the economy.

QE+deficit spending enables people with debt to service their debt. If people can't service their debt the banks go bankrupt.

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I don't QE is the correct solution but I disagree with those who think we need to be "tough".

By being tough they seem to mean embracing a downward spiral in living standards for all (well almost all, the richest seem to be just fine).

This seems to be combined with a corporatist agenda of low/no taxation for businesses and free movement of people to allow the rich to live in tax havens and the poor to pick up the bills. The cycle then continues with the tax revenues falling whilst the costs go up.

What the government should be doing is looking for a solution that improves the lives of people in this country. Be it a citizens income, new tax arrangements (so that people like me don't pay more corporation tax than multinationals with special arrangements) or whatever.

I think the reason for this is because people here equate nation state spending with households. They seem to believe to that if the government cuts spending it has no ill-effects but brings the nation back into balance as would happen with a household.

Rather what we would see is fairly large scale liquidation of our economy. If we cut by the 8 or so percent to bring the budget into balance we would see a 10% or so shrinkage of our economy. Needless to say we would see zero real improvement in the deficit because of the fall in tax revenues that would accompany such shrinkage.

We have plenty of evidence for this from what we have seen in the PIIGS economies, to the great depression where Herbert Hoover was advised to " "liquidate labor, liquidate stocks, liquidate farmers, liquidate real estate..." The end result being devastation of the U.S. economy, starvation, shanty towns, and 25%+ unemployment.

Ironically the UK escaped having a great depression, by going on a infrastructure building boom - namely in housing.

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http://www.bbc.co.uk/news/business-23137744

Here's what happens when the economists propose something the politicians don't like.

So much for "independence".

1 year later to the end of 2014. Or coincidentally 5 months before the next election, so probably too late for it to have an effect. Call me cynical.

'independence' was only ever a legality anyway. Its only a complicit BBC et al that peddled the idea that there was any practical significance.

BoE must base its decisions on what the govt tells it inflation is.

BoE must base its decisions on what the govt tells it what it wants inflation to be.

BoE's MPC is majority installed directly by the chancellor.

Not really independent in any sense.

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  • 433 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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