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Brown Risks Row With Bank Of England Governor

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Brown risks row with Bank of England governor

Gordon Brown on Thursday risked a row with Mervyn King, Bank of England governor, after he blamed much of the economic slowdown on the Bank’s decision to raise interest rates four times before the election in May.

Asked by members of a parliamentary committee why he had slashed his economic growth forecast from 3-3.5 per cent in March to 1.75 per cent in this week’s Pre-Budget report, the chancellor cited exceptional circumstances.

“If interest rates rise four times, it’s bound to have an effect on consumer demand and bound to have an effect on the housing market,” he said. “I don’t think anyone would doubt that four interest rate rises were bound to be the major factor.”

His comments came just weeks after Mr King blamed a rising tax burden for lower consumer spending growth towards the end of last year. Mr King said: “The quite sharp rise in the ratio of taxes to household disposable incomes – that ratio has gone up by almost 2 percentage points over the past couple of years. It’s not surprising therefore that households spent less.”

Asked whether he accepted this analysis, Mr Brown said: “I think the governor would probably on reflection also talk about the rise in interest rates.” But Mr Brown also credited policymakers with having avoided a recession by engineering a slowdown.

On Thursday the Bank left its main interest rate at 4.5 per cent for the fourth consecutive month, thwarting retailers’ hopes of a cut to encourage pre-Christmas spending.

Mr Brown said that last year Britain had faced a housing boom and rising inflation, due in part to sharply rising oil prices that had also depressed demand from the eurozone. But Mr King has always denied that the Monetary Policy Committee targets asset prices, arguing that its remit is to keep consumer price inflation to 2 per cent.

Although Mr Brown and Mr King disagree about the exact cause of the slowdown, both agree that growth next year will be stronger. The Treasury expects the economy to grow by 2-2.5 per cent while the Bank’s projection is for a 2.5 per cent rise, driven by a revival of business investment, consumer spending and exports.

Mr Brown rejected the idea that he would have missed his golden rule only to borrow to invest over the economic cycle, had he not extended his definition of the economic cycle twice this year. The Institute for Fiscal Studies said Mr Brown would have broken the rule by £2.5bn had he not tweaked the period of the economic cycle.

When Lamont raised interest rates he directly got the blame of course, this is still used as a cautionary tale as you could see on Question Time tonight.

Brown didn't want to risk that of course. The MPC was always created as an insurance policy, make them quasi-independent and take the credit when things are good, how many times have you heard Balls and his ilk repeat "low inflation, stable low interest rates" for example? Of course when things turn sour you can just blame the MPC and hope they become the lightening rod in place of the Treasury, Brown just needs to hope it doesn't rebound too much otherwise people may start asking who created this MPC gig in the first place, and difficult questions about who appoints members, etc.

This is interesting of course because HM Treasury has explicitly taken credit for "moderating the housing market", Balls has made this boast repeatedly.

Edited by BuyingBear

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“If interest rates rise four times, it’s bound to have an effect on consumer demand and bound to have an effect on the housing market,” he said. “I don’t think anyone would doubt that four interest rate rises were bound to be the major factor.”

So let me get this straight - he is saying that a slow down in the housing market is a bad thing and he would be happy to see prices keep rising?

Well - I think we know the GB isn't going to do anything about the housing market and would happily see it booming again.

Is this guy mad - he seems p1ssed off that we are not all prepared to go on spending huge amounts on credit cards and buying cr@ppy 2 bed flats at £250k a go.

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“If interest rates rise four times, it’s bound to have an effect on consumer demand and bound to have an effect on the housing market,” he said. “I don’t think anyone would doubt that four interest rate rises were bound to be the major factor.”

So let me get this straight - he is saying that a slow down in the housing market is a bad thing and he would be happy to see prices keep rising?

Well - I think we know the GB isn't going to do anything about the housing market and would happily see it booming again.

He doesn't care about people in their 20's or 30's because by the time most of them have sobered up, which will undoubtedly take a while given the new licensing laws, he won't be around to reap the consequences, at least he hopes not given how long he has waited so far. Whether you agree with them or not remember that they blatantly lied on things like tuition fees which were in black and white in their manifesto. Initiatives like shared ownership and Prescott's handful of rabbit hutches build on former toxic waste dumps are just for PR purposes, to give the pretense that their Old Labour soul is intact, in reality they cannot afford for them to succeed because it would knock the bottom rung out of the market, just what we need is thousands of publicly funded 'apartments'... there is a real lack of supply in that area!

Brown cares about the >70% of home owners who think they're getting free money and damn consequences like their own children eventually being practically homeless and their next jump up the rung being disproportionately expensive, and the fact that basic services in the local economy wont have any flesh blood... all that involves some longterm thinking and doesn't sit well compared to a new 4x4 and holidays!

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When Lamont raised interest rates he directly got the blame of course, this is still used as a cautionary tale as you could see on Question Time tonight.

ETC

This is interesting of course because HM Treasury has explicitly taken credit for "moderating the housing market", Balls has made this boast repeatedly.

Wonderful stuff - thanks for that!

But didn't the Financial Community teach Lamont a lesson when his Govt got too big for it's Balls? :lol::lol::lol:

Gordon Brown - Next Prime Minister Example?

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How I long for the day that b@stard is acknowledged as the clown he really is.

For a while I thought he might actually be fairly sensible, and realise that asset bubbles are a danger, but sadly nothing he could do anything about.

The above quote shows his true colours - a short-term opportunist. And all to pay for silly socialist schemes that won't change a thing. What a vile man.

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How I long for the day that b@stard is acknowledged as the clown he really is.

For a while I thought he might actually be fairly sensible, and realise that asset bubbles are a danger, but sadly nothing he could do anything about.

The above quote shows his true colours - a short-term opportunist. And all to pay for silly socialist schemes that won't change a thing. What a vile man.

For me personally, this is a telling tale. On one hand, a chancellor that cannot ballance the books. On the other, a reasonable, intelligent and no doubt right wing bank of England govenor who is doing his primary job - CONTROLLING INFLATION!!!!!

the chancellor made the BOE independent with ONE mandate - CONTROL INFLATION!!! in othr words, Gordy has Fooked it, find a scape goat, running thin, therefore, blame, yes you have guessed it, BOE govenor!!! yet ths one, I very much hope will not simply roll over and die.

Edited by mbga9pgf

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Most stop-go problems that Britain has suffered in the last fifty years have been led or influenced by the more highly cyclical and often more volatile nature of our housing market

Don't think for one second that this man doesn't understand what has happenend.

He knows that it's the housing market that brings the British economy to it's knees, and it's going to happen again on his watch.

I doubt he wants it to happen, he wants the job in number ten.

But some things are just much bigger than any single man.

Edited by BandWagon

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How I long for the day that b@stard is acknowledged as the clown he really is.

For a while I thought he might actually be fairly sensible, and realise that asset bubbles are a danger, but sadly nothing he could do anything about.

The above quote shows his true colours - a short-term opportunist. And all to pay for silly socialist schemes that won't change a thing. What a vile man.

Yep, Brown's a either complete shyster or a fruitcake who's deluding himself..........

Either way he's not Prime Minister material yet he's a cert to be our next PM !

God help us if this clown is the best we can do!

Edited by Michael

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the chancellor made the BOE independent with ONE mandate - CONTROL INFLATION!!! in othr words, Gordy has Fooked it, find a scape goat, running thin, therefore, blame, yes you have guessed it, BOE govenor!!! yet ths one, I very much hope will not simply roll over and die.

Well, no. The BoE has only one numerical target, which is the inflation rate, but their mandate includes supporting economic growth and employment. They are, in fact, supposed to take slightly larger risks with their inflation target if it will support the economy in other ways to do so, and this is presumably what Brown complains they're not doing.

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I don't think Brown will succeed Blair. There are a lot of Labour back-benchers who are very unhappy with what their party has turned into. When Blair does go - I don't know what Labour party rules are (no doubt many, many committees are involved) but I think there will be a fight that will rip the party apart.

I think the worst charge you can level at Brown is that he is a bloody fool. He has tied a millstone of another million public sector workers around our necks forever. It's easy to employ an army of target setters but a lot harder to get rid of them. We are all paying now for another million salaries, computers, desks and chairs etc and, of couse, bullet proof pensions.

When the economy slowed after the dot com boom and 9/11 anyone could see that people were going on a spending binge - helped by 50 year low interest rates. It should have been a golden time. Smaller mortgage payments should have meant people either saved or spent their own money on consumer goods.

But no, they spent money on bigger mortgages for the same houses. He (Brown) should have seen we were collectively tying a debt noose around our necks and introduced credit controls. He will go down in history as the worst chancellor since the war - because we are in for the biggest bust since the 30s - and all his talk about investment in skills and education won't change anything.

One of the main reasons we cannot compete in global markets is that we all need so much money to live on - to pay for the roof over our heads.

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Guest growl

I don't think Brown will succeed Blair. There are a lot of Labour back-benchers who are very unhappy with what their party has turned into. When Blair does go - I don't know what Labour party rules are (no doubt many, many committees are involved) but I think there will be a fight that will rip the party apart.

Bring it on!

:D

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Agreed: it seems to me that most Labour MPs have been holding their noses for years knowing that Blair would get them reelected even if they hated the man. I think Brown is going to have a hard fight to become PM after Blair leaves, and odds are the Tories will be laughing as the different Labour factions turn on each other. There simply isn't another Labour candidate I can think of who can continue to lead it as Tory Lite, and without one they're going down at the next election.

One of the main reasons we cannot compete in global markets is that we all need so much money to live on - to pay for the roof over our heads.

Yep. It's amazing how few people understand that.

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Guest Charlie The Tramp

Well, no. The BoE has only one numerical target, which is the inflation rate, but their mandate includes supporting economic growth and employment. They are, in fact, supposed to take slightly larger risks with their inflation target if it will support the economy in other ways to do so, and this is presumably what Brown complains they're not doing.

Their remit is also to maintain Financial Stability.

One of the Bank's two core purposes is to maintain the stability of the financial system. The Bank has to make sure the overall system is safe and secure and that threats to financial stability are detected and reduced. By monitoring and analysing the behaviour of participants in the financial system and the wider financial and economic environment, the Bank aims to identify potential vulnerabilities and risks, with a view to making the system stronger.

Well 1.14 trillion personal debt is not what I would call financial stability.

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  • 301 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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