Tuesday, February 3, 2009

Why didn’t he say this three years ago?

BoE would monitor house prices under Tory rule

A Conservative government would order the Bank of England to keep a lid on excessive borrowing as part of its mandate, including monitoring house prices, the shadow chancellor George Osborne has said. Our housing boom was much larger than America's. Our households are more indebted, with the debts to income standing at 175% for the average British family compared to 140% for the average American family. Recent economic growth had been dangerously reliant on financial services, the shadow chancellor said, with nearly two thirds of all new jobs over the past five years coming from that sector.

Posted by little professor @ 04:46 PM (676 views)
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7 thoughts on “Why didn’t he say this three years ago?

  • eyeoftheweasel says:

    I’m guessing it’s because Ken Clarke is George Osborne’s new puppet master.

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  • Finally – some sense!!!

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  • notaneconomicsguru says:

    Well he’s certainly right about broadening the BoE mandate – its pretty obvious that needs doing.
    As for monitoring house prices I think that’s just a political sop. Tories didn’t fuss at all about house price inflation during their own asset bubble in the 80s, and they certainly didn’t fuss about itduring the 95-07 years of the last HP bubble either. What Brown et. all got wrong in looking back at the Tories mistakes was to regard the root of all evil being high IRs. They assumed that if you managed to keep RPI/CPI stable and low then long terns IRs would be low and stable and you’d be able to have steady growth forever and avoid the tragic Tory HP crash of the late 80s early 90s. Its clear now that wasn’t enough – they forgot to plan for the effects of out of balance money supply growth and contraction and they certainly didn’t respond to it at all when it started happening after 2001. Instead they started doing really dim things like chasing CPI with increasing IR when it was external commodity prices rising in response to supply/demand issues and not monetary inflation that was driving the prices – in fact at the time money supply measured in terms of loans to consumers and business was rapidly falling as we all know.
    What’s needed now IMHO is not another shallow assessment and political knee jerk to the mistakes of Brown et al, but a far reaching analysis of what measures are now needed to mitigate against the worst excesses of boom and bust. In designing a new approach its necessary to consider the impact of all conceivable risks and to define mitigations to reduce the effect of the impacts. Its also necessary to build in monitoing and flexibility so the approach can be reviewed and varied in response to circumstance and the emergence of new risks that were not originally conceived of.

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  • I agree notaneconomicsguru. I am notapoliticsguru but it’s very easy to stand there and make claims. All politicians are guilty of saying and doing what gets them votes at the time. But it always goes to the extreme so the wheels come off and then they lose the next election – but its all done to hang on to power for as long as possible. We should have some system in place whereby if certain (particularly dire) circumstances come about then there’s a general election. Then they would all do whatever they could to avoid those circumstances. But then – no doubt whoever got in would change the conditions to suit them…

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  • the troys would have great difficulty making this work

    oops torys

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  • The BOE monitoring house prices…..panic over then!

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  • stillthinking says:

    They need to change the valuation models that banks use on their assets, and then banks would look after themselves. Mark to market is useless.

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