Friday, May 16, 2008

If you don’t like the game, change the rules

Bank of England 'must abandon inflation target or crucify consumer'

'The Bank of England will "crucify" consumers unless the Treasury lets it abandon its inflation target, one of Britain's leading economic authorities has warned. The Government must consider re-writing the Monetary Policy Committee's remit or leave the UK to face an unnecessarily deep and painful economic slump, according to Peter Spencer, chief economist of Ernst & Young Item Club.' Perhaps house prices are shortly going to be considered for inclusion in CPI?

Posted by quiet guy @ 01:00 AM (1478 views)
Please complete the required fields.



13 thoughts on “If you don’t like the game, change the rules

  • japanese uncle says:

    Excuse me, the BoE’s remit was originally prepared for a rainy day exactly like this! Those idiots claiming the scrapping of the very raison d’etre of any central bank must stitch up their filthy mouths and bang their useless hollow heads to a brick wall as hard as humanly possible, until they are dispatched to a better world.

    Reply
    Please complete the required fields.



  • mark wadsworth says:

    So instead of crucifying ‘consumers’ they are going to crucify net savers instead? Big deal.

    Reply
    Please complete the required fields.



  • @ mark

    –> not “consumers” but “potential customers of E&Y”. As far as savers are concerned, these are a pain to everyone – so forget them. They don’t bring fees, don’t risk money – but want returns. If you allow inflation to soar and keep interest rates low – then savings are going to lose worth over time. Hence you drive spending …. and when all your money is gone. E&Y will be happy.

    Reply
    Please complete the required fields.



  • This was so predictable, now they are going to let the consumer and mortgage holder off, short term. Long term they will all be punished doubly, ££ will go down, inflation of imported necessities will go up (oil, food, Chinese tat etc). Consumers (as people are now called) will clamour for more wages, maybe strikes. All savings will be eroded (which is intentional to make you fritter it away on imported junk and binges at the pub). Ultimately the medicine is going to have to be far harsher. This is starting look like a repeat of the 70’s.

    Reply
    Please complete the required fields.



  • Another “siren” call for rate cuts – King has already stated that he will not be swayed by such self-serving tactics. Lets hope he is a man of his word. I have a feeling the pressure and opinions will raise a huge chorus, as we build towards the next rates decision. Libor is up, banks demanding more money than is currently being made available. There is sod all chance that any real drops in borrowing costs will be seen for a very long time (0.05 basis points – wow Abbey, so generous – that’ll get the housing market and economy moving again), and inflation will jump even further through the roof if the BoE heeds the VI calls.

    Reply
    Please complete the required fields.



  • sold 2 rent 1 says:

    This should not come as a surprise.
    The wealth robbery of the masses will continue and continue until WE demand CHANGE.
    It really is that simple.

    Of course the public will only demand change once houses are in free fall and savings are vanishing fast – which isn’t far away.

    16 May is the turning point in the balance of global consciousness. From now on ethics will begin to shine through over power.
    It is nice to see Dwain Chambers coming clean on drugs at last.

    Reply
    Please complete the required fields.



  • sold 2 rent 1 says:

    2 graphs say it all. Where are your savings?


    Reply
    Please complete the required fields.



  • The Haunted says:

    So now that the soft CPI figures are looking to hard for the government the recomendation id to manage core inflation. that’s only at 1.6%… This really sums up the crooked approach we have seen over the last ten years. Yesterday, when challenged about borrowing £2.7bln to pump into the economy, Brown said: “I did not brak my rules about borrowing, this is a different economic cycle”. Effectivley, when ever anything gets too uncomfortable for them to handle they change the rules. Lets face it, if they had not changed the rules so many times already houses would have already crashed in 2005. I have never felt such loathing for a government before and if I thought that there where enough people to get out their pitch forks, I’d be there to lead at the front.

    Reply
    Please complete the required fields.



  • If you base your monetary policy on a narrow measure of inflation that deliberately excludes awkward but essential components, what happens?

    At first you can get away with it, but wage demands soon run high as workers realise the true cost of living is ahead of the published inflation rate, and the price of goods and services in your narrow measure marches ahead. So little is achieved. Smoke and mirrors, but not a solution; playing games to find a short term excuse to drop interest rates only means that at some point in the future, interest rates will have to run high.

    I’ve been predicting for a long time that the government may ultimately be forced to abandon the policy of inflation targetting, and that if they retain it, a higher target (perhaps 5%) will prove desirable for a number of years.

    The era of cheap money is over, finished, kaput – we now have to deal with the legacy of that era…

    Reply
    Please complete the required fields.



  • Notice why all of this “never happen again” and hold “counter cyclical” stuff will never work.

    People will just convince themselves this is a “new paradigm” and therefore we are not taking advantage of some new condition and change the rules. DOW 36000 , house prices always go up, productivity miracle etc.

    This is too important to be put in the hands of a few designated people. Why not employ one of our varations on a voting system to ensure it is taken care of correctly . The Internet provides the fast and tranparent assembly mechanism for such a repetitive vote. This was not possible a few years ago.

    Reply
    Please complete the required fields.



  • You’re all right, it’s also interesting reading the comments below the article.

    People putting themselves forward as so called experts should also be made – by law – to make their property position perfectly clear.

    I suspect Peter Spencer is nursing a large BTL portfolio.

    I also suspect this whole bubble which will bring our country to it’s knees has been allowed to develop unchecked because of significant self interest by those that should have been keeping it in check.

    Reply
    Please complete the required fields.



  • sold 2 rent 1
    er..
    from 2008 onwards, both Gold and GBP graphs look exactly the same, yet you say one goes up and one goes down.

    You may be right, but the charts don’t convince.

    Reply
    Please complete the required fields.



  • dohousescrashinthewoods says:

    What?! The “unnecessarily deep and painful economic slump” was caused by a decade of boom and debt. Changing the remit now will increase the pain to come. Not changing it will increase the pain being dealt with now.

    Assuming we can actually take enough pain to create a long-term decrease in the “pain-store”, then there is hope. If our “stable and prudent economy” can’t now withstand the necessary speed of readjustment to halt the decline then it is a titanic certainty that UK Plc will founder.

    If we can’t pull up because we would pass out from the shock, then we will hit the ground. How soon is simply a matter of how steeply we’re going down.

    Reply
    Please complete the required fields.



Add a comment

  • Your email address is required so we can verify that the comment is genuine. It will not be posted anywhere on the site, will be stored confidentially by us and never given out to any third party.
  • Please note that any viewpoints published here as comments are user´s views and not the views of HousePriceCrash.co.uk.
  • Please adhere to the Guidelines

Your email address will not be published. Required fields are marked *

You may use these HTML tags and attributes:

<a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <s> <strike> <strong>