Thursday, Nov 05, 2009

Blanchflower admits economy in danger of ´falling off a cliff´

Telegraph: MPC’s 'feeble six’ need to do their jobs before the economy falls off a cliff

"For some reason the rest – the "feeble six", as I have called them – voted to not follow their remit. In the next two meetings the MPC voted unanimously to do nothing. As a result, the pound has fallen and the yield curve has dropped a little a year or two out.

Posted by cat and canary @ 07:58 AM (1132 views)
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9 Comments

1. cat and canary said...

As Blanchflower explains:

It is hard to understand why the majority voted against more QE. It seems that there is considerable confusion over the intended effects of this boost to the money supply.

"The sellers of the assets have more money so may go out and spend it. That will help to boost growth. Or they may buy other assets instead, such as shares or company bonds. That will push up the prices of those assets, making the people who own them, either directly or through their pension funds, better off. So they may go out and spend more. And higher asset prices mean lower yields, which brings down the cost of borrowing for businesses and households. That should provide a further boost to spending. In addition, banks will find themselves holding more reserves. That might lead them to boost their lending to consumers and businesses. So, once again, borrowing increases and so does spending."

Thursday, November 5, 2009 08:01AM Report Comment
 

2. hpwatcher said...

Why would anyone listen to Blanchflower? He is tainted with the ignorance and stupidity of BOE, who took us into this mess with their policies of cheap money to spur growth.

One good thing about going into the Euro, is that idiots like this will have their little seats of power taken away, just like that other idiot Mervyn King.

Thursday, November 5, 2009 08:36AM Report Comment
 

3. estrader said...

Blanchflower is a MORON of the highest order.

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"The sellers of the assets have more money so may go out and spend it. That will help to boost growth. Or they may buy other assets instead, such as shares or company bonds. That will push up the prices of those assets, making the people who own them, either directly or through their pension funds, better off. So they may go out and spend more. And higher asset prices mean lower yields, which brings down the cost of borrowing for businesses and households. That should provide a further boost to spending. In addition, banks will find themselves holding more reserves. That might lead them to boost their lending to consumers and businesses. So, once again, borrowing increases and so does spending."
----------------------

So, Mr Blanchflower...explain what caused the Global Financial Crisis and the need to bail out banks to the tune of BILLIONS of taxpayer money. Nothing worse than a beautiful theory being ruined by ugly FACTS.

Thursday, November 5, 2009 08:36AM Report Comment
 

4. a saver said...

Agree with estrader, if there's anything worse than a moron it's a moron with power e.g. to influence the finances of the country.
Especially one who thinks that ignoring moral hazard and doing more of the same stupid thing that got us into trouble will get us out of it.

Thursday, November 5, 2009 09:07AM Report Comment
 

5. alan said...

"Danny" has a theory to test. He's using the UK to test it.

Now we are at the stage of name calling - the "feeble six" obviously don't see things Danny's way..... He's also using terms like "no brainer" to describe the problems set before the MPC.

Maybe his logic is somewhat weak........?

Thursday, November 5, 2009 09:44AM Report Comment
 

6. cat and canary said...

I agree with alan, and using phrases like "feeble 6" and "no brainer" in the Telegraph shows him to also be politically naive. Im sure that the MPC "feeble 6" are not stupid and believed they had good reasons to doubt QE. And to state that any collapse of the pound is due to their indecision is devisive. Presumably if the UK economy falls off a cliff then Blanchflower will come out saying "well I told you so."

Seems to me like this Blanchflower thinks the title of "professor" entitles him to be right. As estrader says, "a beautiful theory being ruined by ugly FACTS" summarises the problem with some academics, a lack of experience in the real world. Looking through his biography, he seems to have lots of academic experience and no (?) work experience. Apparently never worked for a bank or sat on a board. Oh dear.

Thursday, November 5, 2009 10:05AM Report Comment
 

7. mark wadsworth said...

"The sellers of the assets have more money so may go out and spend it."???

As c+c says, it's a beatiful theory ruined by the ugly fact that sellers of govt bonds are only marginally richer (because BoE is overpaying slightly) and they leave that money safely on deposit with the BoE. Which they will need in future to buy up government bonds when QE is reversed, having banked a small but handsome profit on the way in and on the way out.

Thursday, November 5, 2009 11:07AM Report Comment
 

8. letthemfall said...

It's pointless to call the MPC, Blanchflower and others stupid, because plainly they are not. The article just highlights opposing views and illustrates that collectively they are not even reasonably certain of the outcome of this economic manipulation or what to do in future.

I note the point that QE is causing asset prices to rise, from which one may infer that it is perhaps causing house prices to rise too.

Thursday, November 5, 2009 11:59AM Report Comment
 

9. shipbuilder said...

Lol, everyone has quoted the same bit, including me -

"It is hard to understand why the majority voted against more QE. It seems that there is considerable confusion over the intended effects of this boost to the money supply. In Quantitative Easing Explained, the Bank of England says that direct injections of money into the economy, primarily by buying gilts, can have a number of effects.
"The sellers of the assets have more money so may go out and spend it. That will help to boost growth. Or they may buy other assets instead, such as shares or company bonds. That will push up the prices of those assets, making the people who own them, either directly or through their pension funds, better off. So they may go out and spend more. And higher asset prices mean lower yields, which brings down the cost of borrowing for businesses and households. That should provide a further boost to spending.
In addition, banks will find themselves holding more reserves. That might lead them to boost their lending to consumers and businesses. So, once again, borrowing increases and so does spending." Fair enough."

So in other words the ONLY thing supporting spending and so the economy is credit supporting inflated asset prices? And that is sustainable how?

Thursday, November 5, 2009 06:31PM Report Comment
 

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