Thursday, September 24, 2009

Economists summoned to BoE

Bank calls 'crisis' meeting for experts

"The Bank will host a seminar of all London's major economists next Tuesday – the first time it has invited them in en masse in recent memory – in what has been construed as a sign that it fears market participants are starting to lose faith in its (QE) efforts to pump cash into the economy". Any suggestions?.

Posted by alan @ 08:15 AM (1420 views)
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17 thoughts on “Economists summoned to BoE

  • No doubt to explain to economists in very guarded and opaque language that their number one priority is to get house prices rising again “to repair bank’s balance sheets”.

    The future be damned. Who cares about social externalities of unsustainably rising house prices?

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  • since when did it cause “confusion” that printing money will devalue currency ? Simples.

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  • Does anyone think with rates set to stay low and QE now looking irreversible, a further 25-30% fall in house prices is looking very much in doubt?

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  • @3

    with the massive inflation it would cause, and the fact that 25% are already struggling to pay bills, I do not think it will prevent HP crash at all.

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  • Indeed inbreda.

    I’m optmistic and sceptical that the current measures are rather desperate throw of the dice to try to cling to the old model.

    One thing I’m certain of and economists should by now be in no doubt of – the Bank of England created the credit boom and now is going hell for leather to prolong it.

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  • If the current system fails – how can someone protect themselves, i.e. buying gold is no good when no one will work!

    Also with all these town setting up their own currency is it possible to setup one based on a gold standard to compete with stealing (sorry I mean sterling)

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  • I’ve an idea that the economists can put to the BoE: instead of buying gilts off the banks and corporate bonds to produce quantitative easing,the Guv creates an equivalent amount of money to pay for numerous vast infrastructure projects which it ensures are not inflationary by recovering the money by a tax on the increased land values that new infrastructure brings.
    You’re right, I have n’t been invited to the meeting next Tuesday.Must have got lost in the post.The postmen are always on strike round here,not that I blame them.

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  • matt_the_hat,

    If the current system fails you could protect yourself with seeds, farming land, equipment and weapons – and, even better, friends.

    RE: A proprietary currency to compete with Sterling:
    I think you’d have a fight on your hands ;p

    “Whoever controls the volume of money in our country is absolute master of all industry and commerce…and when you realize that the entire system is very easily controlled, one way or another, by a few powerful men at the top, you will not have to be told how periods of inflation and depression originate.” – James A. Garfield, president of the United States (1881) – two weeks before he was assassinated.

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  • Talking of Sterling, it’s getting hammered today.

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  • I’m sure we’re all relieved it’s the major economists in on the show and not the minor ones. As for foreseeable future, how long is that? Until next month’s inflation figures?

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  • I’m sensing that confidence in sterling is faltering, that QE was accepted as an emergency measure at the outset, but is not acceptable as an ongoing solution.

    The BoE could easily find itself presented with the choice of either accelerating QE, or raising interest rates.

    If they raise the pace of QE, then it is likely that more overseas investors will want to get out of Sterling, thereby forcing even greater QE. That would see Sterling collapse, and propel us into high inflation.

    I think they need to raise interest rates steadily; and sufficiently, as to be able to phase out QE, and eventually, move toward offloading the Gilts that were bought.

    – I’m wondering just how high interest rates will have to go..

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  • [email protected]:11pm

    But given that a recent survey suggested that 25% of the UK population is not able to pay mortgage and basic bills and a further 14% state that increased outgoings of £50 per month will put them in the same camp, I’m not sure raising interest rates is a possibility.

    Oops!

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  • materialistic weasle says:

    Does anyone know just how long the goverment could actually sustain QE at the current rate ?

    I was under the impression the latest injection was the last desparate sh1t or bust throw of the dice.

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  • d’oh,

    The rates mortgage holders pay has become substantially disconnected with Bank Rate – it is only really relevant now to those who have trackers.

    Paradoxically, if Bank Rate rose, and with it, Gilt yields; the renewed confidence in Sterling might serve to prevent market rates from going too high.

    Look at the proportion of mortgage funds that come from overseas, and consider the returns the lenders will want to roll over the deals. If the UK heads toward hyper-inflation, who will want to renew?

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  • mark wadsworth says:

    Like DBC (comment 7) I didn’t receive an invitation either, so it’s obviously just “the little people” who are going.

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  • nopensionnohouse says:

    The word “experts” should be in quotes rather than “crisis”.

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  • @12 d’oh

    I think that raising interest rates is politically unacceptable for Labour, but for the Tories it will make sense because they can blame the HPC and higher unemployment etc. on Labour and as long as it happens quickly it will leave the majority of the rest of their first term for the economy to improve. Thus paving the way for an almost guaranteed 2nd term fought on the basis of “It was us that fixed the economy”.

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