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munro

Hpi And Inflation Targetting

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I'm beginning to think that what's underpinning a lot of the current economin madness, and is beginning to go hideously wrong, is central banks' obsession with inflation targetting.

Two reasons:

1. People have adjusted their economic behaviour to low interest rates but NOT to low wage inflation. The first without the latter is a recipe for a long, slow, and very painful readjustment, as debts just don't get eroded in the way that folk myth (what people have had drummed into them by their parents all their lives) says they will - because the pay rises don't happen.

2. In creating a climate of stability central banks show that they will take whatever action is necessary to shield the economy generally from speculative excess. The consequence is that speculators know they can move into a market, ramp prices, suck in new muppets with sophisticated financial engineering, and so on and so on, KNOWING that they have an insurance policy against the consequences - because they know the central banks will maintain a stable backdrop whatever the cost. Where this cost is borne by us collectively so it looks like a victimless crime. This myth of stability is truly dangerous because it looks like a one-way bet and I'm sure the really smart money is ruthlessly exploiting this trend.

IN truth central banks are shifting economic risk AWAY from speculators and loading it onto the rest of us, and surprise surprise - speculators are letting rip.

This mania for stability at whatever cost has distinguished recent central bank policy round the western world and I see Bernanke is committed to it - even more so than Greenspan. So the speculators are delighted with him as they know he'll continue to compensate for their excesses at our expense while they can get on with screwing us over for mega-bucks.

Can't think of any other rationale for the current madness.

Adapted this from a reply to one of apom's threads as I'm interested to know what people think. There has to be some basis for what looks like irrational economic behaviour - excess liquidity all round - and I wonder if this climate of stability/low inflation underwritten by central banks is directly responsible for it.

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I'm beginning to think that what's underpinning a lot of the current economin madness, and is beginning to go hideously wrong, is central banks' obsession with inflation targetting.

Two reasons:

1. People have adjusted their economic behaviour to low interest rates but NOT to low wage inflation. The first without the latter is a recipe for a long, slow, and very painful readjustment, as debts just don't get eroded in the way that folk myth (what people have had drummed into them by their parents all their lives) says they will - because the pay rises don't happen.

2. In creating a climate of stability central banks show that they will take whatever action is necessary to shield the economy generally from speculative excess. The consequence is that speculators know they can move into a market, ramp prices, suck in new muppets with sophisticated financial engineering, and so on and so on, KNOWING that they have an insurance policy against the consequences - because they know the central banks will maintain a stable backdrop whatever the cost. Where this cost is borne by us collectively so it looks like a victimless crime. This myth of stability is truly dangerous because it looks like a one-way bet and I'm sure the really smart money is ruthlessly exploiting this trend.

IN truth central banks are shifting economic risk AWAY from speculators and loading it onto the rest of us, and surprise surprise - speculators are letting rip.

This mania for stability at whatever cost has distinguished recent central bank policy round the western world and I see Bernanke is committed to it - even more so than Greenspan. So the speculators are delighted with him as they know he'll continue to compensate for their excesses at our expense while they can get on with screwing us over for mega-bucks.

Can't think of any other rationale for the current madness.

Adapted this from a reply to one of apom's threads as I'm interested to know what people think. There has to be some basis for what looks like irrational economic behaviour - excess liquidity all round - and I wonder if this climate of stability/low inflation underwritten by central banks is directly responsible for it.

Yes, sadly I agree with everything you have said.

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1. People have adjusted their economic behaviour to low interest rates but NOT to low wage inflation. The first without the latter is a recipe for a long, slow, and very painful readjustment, as debts just don't get eroded in the way that folk myth (what people have had drummed into them by their parents all their lives) says they will - because the pay rises don't happen.

quite right. The shocking truth is that house prices should actually go DOWN with IRs, not against them.

Actually, while that may not be strictly true, it is useful to get a debate going with certain people. One thing I am pretty sure of is that the inverse link between IRs and house prices is deceptive and dangerous. House prices should have nothing to do with IRs, for precisely the same reason that you gave.

The notion of monthly affordability is cute and everything, but it neglects a far more important question - total affordability.

Of course, this only applies while inflation targeting policy retains integrity - thing is, we simply cannot afford to inflate our way out of this debt bubble because we would only further price ourselves out of the global jobs market. Unless the oil runs out... aaaanyway

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I'm beginning to think that what's underpinning a lot of the current economin madness, and is beginning to go hideously wrong, is central banks' obsession with inflation targetting.

Two reasons:

1. People have adjusted their economic behaviour to low interest rates but NOT to low wage inflation. The first without the latter is a recipe for a long, slow, and very painful readjustment, as debts just don't get eroded in the way that folk myth (what people have had drummed into them by their parents all their lives) says they will - because the pay rises don't happen.

2. In creating a climate of stability central banks show that they will take whatever action is necessary to shield the economy generally from speculative excess. The consequence is that speculators know they can move into a market, ramp prices, suck in new muppets with sophisticated financial engineering, and so on and so on, KNOWING that they have an insurance policy against the consequences - because they know the central banks will maintain a stable backdrop whatever the cost. Where this cost is borne by us collectively so it looks like a victimless crime. This myth of stability is truly dangerous because it looks like a one-way bet and I'm sure the really smart money is ruthlessly exploiting this trend.

1 As a generalisation, I totally agree.

2 Absolutely

IN truth central banks are shifting economic risk AWAY from speculators and loading it onto the rest of us, and surprise surprise - speculators are letting rip.

Yes, It is not just speculators though; people have been buying houses because conventional financial methods for example saving accounts and pensions are being plundered. Little do they know that houses will be plundered in the future too because... If you are in government and want to keep being elected then you plunder those that can afford it to keep the poor happy. Obvious isn't it.

Adapted this from a reply to one of apom's threads as I'm interested to know what people think. There has to be some basis for what looks like irrational economic behaviour - excess liquidity all round - and I wonder if this climate of stability/low inflation underwritten by central banks is directly responsible for it.

Absolutely. Totally engineered by the central banks and governments. I personally feel it’s partly being done to balance the world, whether by design or natural effects I am unsure.

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1 As a generalisation, I totally agree.

2 Absolutely

Yes, It is not just speculators though; people have been buying houses because conventional financial methods for example saving accounts and pensions are being plundered. Little do they know that houses will be plundered in the future too because... If you are in government and want to keep being elected then you plunder those that can afford it to keep the poor happy. Obvious isn't it.

Absolutely. Totally engineered by the central banks and governments. I personally feel it’s partly being done to balance the world, whether by design or natural effects I am unsure.

Probably by design - politicians dont want to deal with the social issues that inevitably result from economic volatility.

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  • 337 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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