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Mixle

Warp Speed, Scalding Hot - Carney, Now Dale

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http://www.myfinances.co.uk/mortgages/2013/12/14/bank-of-england-s-dale-says-no-rate-rise-until-wages-higher

What changed last month? When central bankers get in sync, I worry.

The naive options I can think of:

  • they're going to let it hit warp speed, but publically avoiding blame or scoring for hindsight (more likely)
  • they're going to try and walk the system down (less likely)

Opinions?

Edited by Mixle

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He's using a clunky metaphor, therefore he do be guessing.

And he says "when" interest rates rise. Doesn't specify the base rate, and doesn't admit that the base rate can't rise.

We are in the grip of bullshitters.

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The message is simple to understand.They couldn't be more clear:

"Buy a house, don't worry about an interest rate spike, we won't let that happen"

Of course, I don't recall anyone ever actually planning an interest rate spike, these things tend to be "unexpected" and the result of a government that's lost control (propagandised as external events nobody expected, or could have predicted).

Plan A has always been keep up house prices so that the banks don't fail because all their mortgages are underwater.

I'm sure everything will be fine :)

Edited by SpectrumFX

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"But let's not be naive. Anyone with more than a passing interest in British economic history is aware that the UK housing market has a sort of microwave type quality to it, with a tendency to turn from lukewarm to scalding in a matter of a few economic seconds.

"The Bank is fully aware of this risk. The good news, however, is that it's far better equipped to respond to these type of risks than in the past."

The latest Halifax house price index puts the annual rise of house prices at 7.7 per cent, the biggest annual rise for six years.

Mr Dale outlined that the Bank’s new executive body, the Financial Policy Committee (FPC) has been given the powers to intervene to stop "potential excesses in the property market which pose a threat to the stability of the financial system.”

The FPC has created a new power for regulators that will allow them to alter rules on affordability which buyers need to meet so that there is a better check in place to ensure they can repay their mortgages if rates do go up.

The FPC has also said it can force lenders to hold more capital to increase their costs so that mortgage lending becomes less attractive to them.

Tell us more - don't be vague. Where is the new power written? Let's see the remit for the new power

The "new" power sounds pretty pathetic and little or no better than what was available before.

Note how they've changed from talking about bubbles to talking about "speed" and "temperature", warp speed and so on.

Edited by billybong

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Mr Dale said that the property market turns "from lukewarm to scalding hot in a few economic seconds".

For sure the property market propaganda turns that quickly and it's at warp speed at the moment.

Edited by billybong

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So, we'll have a continuation of price inflation and stagnant wages.

I can't see a way out of this mess.

.....but how can prices inflate without the wages to pay that price?......prices can inflate very quickly when wages are on the up.......but we are now in a globalised market, we have to stay in business by trading with others in labour, goods services and prices, being competitive with the rest of the world unless we go down the dark path of protectionism, trade tariffs and exchange control....... ;)

Edited by winkie

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Mr Dale also moved to reinforce the message that when interest rates do rise, they will go up gradually

Do any of you remember a few years ago a couple of members of the MPC saying "when interest rates go up they will go up fast"?

Just had a google and couldn't find the articles.

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Feck iv`e missed the boat again

1: HTB has fallen on its face and they are trying to induce a bit of fear as above ?

2: HTB is looking like it`s doing its job and they are showing some faux concern ?

I just think it`s reverse psychology ramping

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The chief economist at the Bank of England, Spencer Dale has likened the UK housing market to a microwave.

http://

www.honesthomeinspections.com/microwave-leakage

Microwave Leakage

Honest Home Inspections will gladly test for Microwave Leakage in your home, see the "Fees and Services" page for details. Microwave Leakage detection is included in any inspection where the microwave is part of the sale of the property. The following information will try to answer questions you have in regards to Microwave radiation.

Have you ever watched up close as your leftovers heated in a microwave oven? Has your child? How much body penetrating microwave radiation do you think you took in? Would you like to know before you do it again?

Microwave oven leakage is serious business. Every year millions of children, pregnant women, and people of all ages stand too close to an operating microwave oven, exposing themselves to dangerous levels of body penetrating microwave radiation. Microwave radiation is known to cause cataracts, birth defects, cancer and other serious health problems. Warning labels are included in every oven owner's manual. The FDA takes the problem so seriously, it has set legal limits on the amount of leakage permitted.

.....

Tips on Safe Microwave Oven Operation

Follow the manufacturer's instruction manual

for recommended operating procedures and safety precautions for your oven model.

Don't operate an oven if the door does not close firmly or is bent, warped, or otherwise damaged.

Never operate an oven if you have reason to believe it will continue to operate with the door open.

Some ovens should not be operated when empty. Refer to the instruction manual for your oven.

Clean the oven cavity, the outer edge of the cavity, and the door with water and a mild detergent. A special microwave oven cleaner is not necessary. Do not use scouring pads, steel wool, or other abrasives.

To add to the margin of safety already built into the oven, don't stand directly against an oven or peer inside of the oven (and don't allow children to do this) while it is operating.

Users should not heat water or liquids in the microwave oven for excessive amounts of time a phenomenon of superheating can occur.

Just saying.

In a speech to business leaders in Newmarket, Mr Dale said: "A healthy housing market is good for our economy and supports the recovery.

After the speech it wouldn't be a complete surprise if some of the "business leaders" left muttering between themselves. "They've gone utterly crazy".

After all the Institute of Directors and some bankers called some of the economic policies mad and moronic.

Edited by billybong

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Tell us more - don't be vague. Where is the new power written? Let's see the remit for the new power

The "new" power sounds pretty pathetic and little or no better than what was available before.

Note how they've changed from talking about bubbles to talking about "speed" and "temperature", warp speed and so on.

I imagine it is written on the official documents that lay out the FPC's remit. As a public body, they will be freely available on the Internet.

The new powers sounds pretty effective to me, if utilised (a big "if" I know). Those powers could feasibly bring about a house price crash if it were so minded.

The powers are there. It is the will to use them that is probably lacking.

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I imagine it is written on the official documents that lay out the FPC's remit. As a public body, they will be freely available on the Internet.

The new powers sounds pretty effective to me, if utilised (a big "if" I know). Those powers could feasibly bring about a house price crash if it were so minded.

The powers are there. It is the will to use them that is probably lacking.

Like a parent that constantly threatens to discipline a petulant child but never does.

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Its BECAUSE of low rates wages ARENT 'rising'

All these economists (deliberately, i may add) ignore REAL inflation (ie purchasing power, wage rate inflation minus price inflation) and only ever report nominal inflation.

If prices are rising faster than wages, monetary policy is too loose.

I dont care if price inflation is 15% and wage inflation 10% as it was in the 70s, or if price inflation is 5% and wage inflation is 0% as it is now. The net effect on workers income and their standard of living is the same. They abuse people's ignorance that <5% inflation is acceptable (its not, if wages arent rising)

This policy is how we will see the accelerated destruction of living standards over the next couple of decades.

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http://www.myfinance...il-wages-higher

What changed last month? When central bankers get in sync, I worry.

The naive options I can think of:

  • they're going to let it hit warp speed, but publically avoiding blame or scoring for hindsight (more likely)
  • they're going to try and walk the system down (less likely)

Opinions?

Answer - Helping to shore up Sterling to keep inflation under control whilst keeping interest rates low.

It what the UK does best, producing nothing, but running a huge confidence trick to make people think we are a vibrant and thriving financial centre that adds value to the global economy.

By postulating that the market is hot, and therefore that rates may rise, they cause Sterling to rise, which has the effect of keeping inflation down in an economy that would otherwise be hyper-inflating whilst simultaneously devaluing.

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I imagine it is written on the official documents that lay out the FPC's remit. As a public body, they will be freely available on the Internet.

The new powers sounds pretty effective to me, if utilised (a big "if" I know). Those powers could feasibly bring about a house price crash if it were so minded.

The powers are there. It is the will to use them that is probably lacking.

The link for the FPC's remit is quoted below.

https://

www.gov.uk/government/uploads/system/uploads/attachment_data/file/207473/remit_fpc_290413.pdf

Housing doesn't seem to be mentioned and there's no specific powers listed there for anything else. That's not to say that they don't have any powers but they don't seem to be listed there.

Also there's plenty about "the financial system" - but about housing, no.

The bit in the OP link about "it can force lenders to hold more capital to increase their costs". How likely is the FPC to do that to limit the house price bubble when it will also have an impact on the financial system or on lending to other sectors. So how do they force them to hold capital to increase their costs only for housing lending. They'll have to go back to some arrangement like property lending to be only allowed by building societies - and some would say that would be a good idea.

They don't have to call them building societies. They could call them something like House Banks, House Societies or Building Banks etc if they really want to. It's matterless but the important thing is that they would be separated from "the financial system".

I agree that it is the will to use any power that will be lacking like it has been in the past.

Edited by billybong

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Apparently whatever powers they might have will mainly only come into effect in January 2014 under an eu directive. So it'll be interesting to see if capital requirements are increased then to account for the bubble in house prices especially in London.

It'll also be interesting to see once the eu directive comes into effect if the eu has anything to say about capital requirements in connection with out of control London etc prices and the way they're being flagrantly microwaved and warped.

Edited by billybong

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Where the speech was made.

http://

www.cbi.org.uk/about-the-cbi/uk/east-of-england/events/

East of England events calendar

CBI East of England has a number of events coming up in 2013/14, further details are below. We hope to see you there.

...

2013

December

East of England Midwinter Lunch

Date: Friday 13

Venue: Tattersalls, Newmarket, Suffolk

Speaker: Spencer Dale, executive director & chief economist, Bank of England

Sponsored by: BDO LLP

A snippet from an earlier event and even a photo of Ed Balls speaking to a journalist.

http://

www.cbi.org.uk/media-centre/news-articles/2012/09/business-leaders-in-the-east-hear-that-industry-and-government-must-work-together-for-the-good-of-the-economy/

Edited by billybong

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Macro pru and forward guidance are the new black.

Same as the old black, but different.

If the last decade was the 'Nice' decade, this decade is the 'Macro Pru' decade.

Outcome won't be dissimilar.

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