Member Of Mpc Admits 'mistakes Were Made' 2003-5

[nixy]

and why were interest rate not raised then?

http://news.bbc.co.uk/today/hi/today/newsi...000/7544539.stm

'mistake were made ........' 3min 50sec

[Realistbear]

HPI-MEW-BTL was Gordon's engine for growth. Kill HPI and you kill the miracle economy.

It is THAT simple, believe me. This is all about house prices and the "experts" are only just waking up to that fact.

When economic historians look back at Gordon's miracle years and ask what went wrong they will come to a simple conclusion: Gordon allowed house prices to get out of control.

[crashmonitor]

About time Merv admitted what a complete f**k up the Committe made of things in 2003.Let's set the scene,HPI at 25%,an Economy entering overdrive and an RPIX target just shy of the target thanks to the massive deflationary effects of chinese goods.So they slashed rates to 3.5%.Measures on HPI and growth were flashing red but the chimps decided that the target was the be all and end all.Yet now with CPI headed for 5% the chimps have jettisoned the target.One rule for boom ,one rule for bust.These criminals are 80% responsible for the bust ,but are trying to pass the blame onto Hector Sants or anybody else they can think of.THE MPC HAVE WRECKED THE UK ECONOMY.

Edited August 6, 2008 by crashmonitor

[Not Long Now]

and why were interest rate not raised then?

http://news.bbc.co.uk/today/hi/today/newsi...000/7544539.stm

'mistake were made ........' 3min 50sec

Amazing. I don't believe it was incompetence IMHO. Central bankers have a vested interest in keeping i/r's low.

[JohnnyB]

About time Merv admitted what a complete f**k up the Committe made of things in 2003.Let's set the scene,HPI at 25%,an Economy entering overdrive and an RPIX target just shy of the target thanks to the massive deflationary effects of chinese goods.So they slashed rates to 3.5%.Measures on HPI and growth were flashing red but the chimps decided that the target was the be all and end all.Yet now with CPI headed for 5% the chimps have jettisoned the target.One rule for boom ,one rule for bust.These criminals are 80% responsible for the bust ,but are trying to pass the blame onto Hector Sants or anybody else they can think of.THE MPC HAVE WRECKED THE UK ECONOMY.

The problem is, the MPC's remit to keep inflation within its target of 2%. Unfortunately for them, GB moved the goalposts when he moved from using the RPI measure of inflation (which includes mortgage interest costs) to the CPI measure of inflation (which is a load of old bullsh1t and chips). This essentially disguised the fact that inflation was crazy and out of control and enabled the MPC to cut rates in 2005 when really we should have had a minor economic slowdown. Fast forward 2 years and the problem couldn't be covered up anymore, and now we're going to get a very harsh recession because we didn't have a small one a few years ago, and people also went on a mad, debt fuelled spending binge due to low interest rates.

[crashmonitor]

The problem is, the MPC's remit to keep inflation within its target of 2%. Unfortunately for them, GB moved the goalposts when he moved from using the RPI measure of inflation (which includes mortgage interest costs) to the CPI measure of inflation (which is a load of old bullsh1t and chips). This essentially disguised the fact that inflation was crazy and out of control and enabled the MPC to cut rates in 2005 when really we should have had a minor economic slowdown. Fast forward 2 years and the problem couldn't be covered up anymore, and now we're going to get a very harsh recession because we didn't have a small one a few years ago, and people also went on a mad, debt fuelled spending binge due to low interest rates.

Nobody told the chimps that they had to stick to the target 2003-2005.Conveniently they have jettisoned the target now as CPI heads for 5% because the Economy is in trouble.They can't have it both ways.If they can jettison the target now they should have jettisoned it during overdrive.

[JohnnyB]

Nobody told the chimps that they had to stick to the target 2003-2005.Conveniently they have jettisoned the target now as CPI heads for 5% because the Economy is in trouble.They can't have it both ways.If they can jettison the target now they should have jettisoned it during overdrive.

They haven't jettisoned the target, there just isn't much they can do to affect it right now. Admittedly their inflation forcasts are rubbish, but the fact the economy is slowing and house prices are falling is likely to bring it back under control soon, provided we don't get a wage price spiral. They probably should have left rates alone at 5.75%, but the target is still there, they just happen to be well wide of the mark at the moment, and it takes quite some time for interest rate rises to filter through to inflation. Abandoning RPI in favour of CPI was the biggest mistake, and the blame lies squarely with our Prime Minister.

[interestrateripoff]

No mistakes where made in 2001.

The Bank of England deliberately stoked the consumer boom that has led to record house prices and personal debt in order to avert a recession the former Bank Governor Eddie George admitted - apparently this isn't economic negligence

2003-5 was just a continuation.

The negligence has been going on for years.

[faloos]

HPI-MEW-BTL was Gordon's engine for growth. Kill HPI and you kill the miracle economy.

It is THAT simple, believe me. This is all about house prices and the "experts" are only just waking up to that fact.

When economic historians look back at Gordon's miracle years and ask what went wrong they will come to a simple conclusion: Gordon allowed house prices to get out of control.

It has to be house prices that has caused this along with the banks as what do we have left to contribute or co control our economy with ? coffee shops ! lets get real here , the uk is a spent force

[crashmonitor]

They haven't jettisoned the target, there just isn't much they can do to affect it right now. Admittedly their inflation forcasts are rubbish, but the fact the economy is slowing and house prices are falling is likely to bring it back under control soon, provided we don't get a wage price spiral. They probably should have left rates alone at 5.75%, but the target is still there, they just happen to be well wide of the mark at the moment, and it takes quite some time for interest rate rises to filter through to inflation. Abandoning RPI in favour of CPI was the biggest mistake, and the blame lies squarely with our Prime Minister.

They could get back to target by hiking interest rates to 10%,just as extreme as 3.5%. The result would be -25% annualised HPI and economic armegeddon just as 3.5% caused +25%HPI in 2003 and economic overdrive.There is no even handedness ,hence the target is a joke.

Of course a rise to 10% would be criminal incompetence ,trouble is 3.5% in 2003 was criminal incompetence.

[It is different this time]

the "experts" are only just waking up to that fact.

Are you sure about that? Most of them think credit crunch is just a blip and are still deluded about house prices.

When economic historians look back at Gordon's miracle years and ask what went wrong they will come to a simple conclusion: Gordon allowed house prices to get out of control.

Did he not promise not to do so?

[Waiting Patiently]

The biggest "mistake" was cutting rates in August 05. Except it wasn't a mistake, it was deliberate, as Gordon Browns 5 monkeys on the MPC outvoted the other 4 in an effort (successful for a time) to get the debt-fuelled housing frenzy kick-started again.

[JohnnyB]

They could get back to target by hiking interest rates to 10%,just as extreme as 3.5%. The result would be -25% annualised HPI and economic armegeddon just as 3.5% caused +25%HPI in 2003 and economic overdrive.There is no even handedness ,hence the target is a joke.

Of course a rise to 10% would be criminal incompetence ,trouble is 3.5% in 2003 was criminal incompetence.

I agree with you, 3.5% was stupid, but hiking to 10% now would mean mass-repos and bankruptcy in many circumstances, and could bring the whole banking system down (more likely end up with taxpayers propping the damn thing up). A few more rate rises would be welcomed by me though, as many here have often said, 5% interest on a £300,000 mortgage is the same as 15% interest on a £100,000 mortgage. The huge debt many people have got themselves into means interest rates don't need to be 10% or 15% for major HPC.

[interestrateripoff]

I agree with you, 3.5% was stupid, but hiking to 10% now would mean mass-repos and bankruptcy in many circumstances, and could bring the whole banking system down (more likely end up with taxpayers propping the damn thing up). A few more rate rises would be welcomed by me though, as many here have often said, 5% interest on a £300,000 mortgage is the same as 15% interest on a £100,000 mortgage. The huge debt many people have got themselves into means interest rates don't need to be 10% or 15% for major HPC.

3.5% isn't stupid if the BoE then enforces lending rules to stop dumb f***s borrowing too much money and putting restrictions down MEWing.

[JohnnyB]

3.5% isn't stupid if the BoE then enforces lending rules to stop dumb f***s borrowing too much money and putting restrictions down MEWing.

Even regulation wouldn't make it workable, as it would provide little incentive to save money, which is our biggest problem IMO.

[PotNoodle]

The decision in August 2005 to drop interest rates (4.5 down to 4.0, was it ?)

was voted against by Mervyn King but went through nonetheless.

It was this decision, above all, that proved truly catastrophic.

It sent a signal - largely to the borrowing public, but also to those who

should have known better - that interest rates had "peaked" and would

be on the way back down to 3.0% so the jamboree could continue.

So we had another two full years of cloud cuckoo land.......

until last July.

I cannot see how anything now can stop an economic catastrophe in this country.

IRs will have to go up again this year.

CPI cannot be controlled.

RPI is off scale.

House prices have only just begun the long slide down.

They sowed the wind, in 2005.

Now, the whirlwind.

[symo]

Don't worry, the IMF will be here soon and 10% will be like a dream. That HPI-MEW-BTL tax got spent on PFI contracts that can no longer be paid for, superflous positions in local and national government.

[VeryMeanReversion]

Don't worry, the IMF will be here soon and 10% will be like a dream. That HPI-MEW-BTL tax got spent on PFI contracts that can no longer be paid for, superflous positions in local and national government.

Interesting that your raise IMF as a subject, it's not been covered much on here.

As the economy enters recession with Govt already borrowing at Euro-rule-busting levels, I can see a Govt borrowing crisis coming in the next few years. (you can't borrow much if you set the interest rate at naff-all%). The IMF is the last resort.

VMR.

[Wait & See]

HPI-MEW-BTL was Gordon's engine for growth. Kill HPI and you kill the miracle economy.

It is THAT simple, believe me. This is all about house prices and the "experts" are only just waking up to that fact.

When economic historians look back at Gordon's miracle years and ask what went wrong they will come to a simple conclusion: Gordon allowed house prices to get out of control.

What I want to know is, where Gordon stole this model for growth from and if he thought it would work indefinitely???

You're right RB. It's so simple and childish that it repels the mind.

[interestrateripoff]

The IMF is skint.

However for a slightly less fee I can do the work of the IMF, its very easy.

Stop health care spending

Stop education spending

Stop welfare spending

etc...

This is what the IMF does it's a piece of cake.

[interestrateripoff]

Even regulation wouldn't make it workable, as it would provide little incentive to save money, which is our biggest problem IMO.

If you have inflation at 2% why isn't 3.5% an incentive? Are you a greedy f***er? Calculating inflation gives you a big problem as no one can give a difinite answer as to how to do it accurately or correctly.

The higher the interest rate the more incentive there is for the City to seek higher capital returns and create inflation as the City has to offer greater returns than simply saving money in banks.

[JohnnyB]

If you have inflation at 2% why isn't 3.5% an incentive? Are you a greedy f***er? Calculating inflation gives you a big problem as no one can give a difinite answer as to how to do it accurately or correctly.

The higher the interest rate the more incentive there is for the City to seek higher capital returns and create inflation as the City has to offer greater returns than simply saving money in banks.

Because actual inflation wasn't 2%, CPI inflation was 2%, which isn't much use to me unless i live on the street and eat iPods and LCD TVs while driving a DVD player.

[interestrateripoff]

Because actual inflation wasn't 2%, CPI inflation was 2%, which isn't much use to me unless i live on the street and eat iPods and LCD TVs while driving a DVD player.

You just can't please everyone

If you can't measure inflation you can't set an interest rate.

[JohnnyB]

You just can't please everyone

If you can't measure inflation you can't set an interest rate.

Yes, but the problem was they could measure inflation, but GB told them to ignore it and look at magic fairy numbers he had made up, thus the interest rate was set for some sort of alternate dimension where people don't need shelter, food or fuel.

[Wait & See]

Merv just likes taking the boaby from Brown. Sad but true.