Monday, 10 October 2016

Crisis!



Even some small part of the Indy is now waking up to the realisation that the big fall in the Pound was a) long overdue and is b) hugely beneficial.

AEP nails it in the Telegraph, quoting Mervyn King:


"During the referendum campaign, someone said the real danger of Brexit is you'll end up with higher interest rates, lower house prices and a lower exchange rate, and I thought: dream on. Because that's what we've been trying to achieve for the past three years and now we have a chance of getting it." 

Roll on dollar parity.

14 comments:

Electro-Kevin said...

Sorry to divert from your post, Blue.

I regret that Nick Kennerley (Beast, Beast of Clerkenwell, The Real Peter Hitchens) passed away two weeks ago.


The funeral is Thursday 13th October 11am at Kensall green crematorium.

I shan't be there as I'm visiting my terminally ill father who has taken a turn for the worse.

Nick Drew said...

Bad news on all fronts there, Kev

You suspected as much about NK: (does Guido know?) - and you know what, it was just a few weeks ago we were reminiscing, wasn't it ..?

keep the flag flying

ND

Electro-Kevin said...

Thanks.

Anonymous said...

Good to see BE back and for once I'm wholly in agreement with him, while I miss those happy 2007 days of the two-dollar pound, I really don't know what's been holding it up - least ugly in the currency beauty contest while the EU was in crisis?

"It is stunning that just 1.4pc of all loans were going to the manufacturing sector"

And they wonder where productivity's gone!

Anonymous said...

And sorry to hear your news, EK

Dick the Prick said...

Oh fuck, sorry about your dad EK. And sorry too about the Beast - he was a very funny chap.

Demetrius said...

Shock horror vote losing. Now all those people who used to fly to New York for super bargains when buying at the sales and for Xmas pressies etc. will not be able to. But far far worse all those who had three flyaway foreign holidays a year now will only have one. Woe, woe thrice woe and all that.

Steven_L said...

you'll end up with higher interest rates, lower house prices and a lower exchange rate, and I thought: dream on. Because that's what we've been trying to achieve for the past three years

Do you honestly still believe a word these central bankers say? When Carney makes a bland speech that's widely reported as him saying an IR rise is imminent he's trying to scam you into fixing your mortgage. That's my conclusion at least, and judging by the folk in the office it works.

King is a liar too. The BofE / HMT have not been trying to achieve higher interest rates or lower house prices, but quite the opposite, as is rather apparent if you look at their policies and decisions. As for the lower exchange rate? Western central banks simply don't manage fx rates any more.

Is the £2bn slush fund May and Hammond are setting up to buy houses directly from house-builders there to achieve lower house prices? Is QE for corporate bonds there to raise borrowing rates? Basically they are printing money to buy houses. I always thought this would be the endgame. These are the seeds that will sow the next proper crisis (in 2023-2025 or so).

Blue Eyes said...

Sorry to hear that your dad is unwell, EK.

Anon and DTP are correct.

Steven L is non-correct. Choc! Low inflation and low interest rates are a sign that money has been too tight in the past. A huge current account deficit shows that money has been too tight in the past. The way to get things more "normal" is to loosen, and probably to overshoot doing so. This seems to now be happening!

I have asked many time before, but get no logical answer from the gold bugs and "internet Austrians": how would raising interest rates now (or at any time over the last several years) help?

I agree on one point: Carney has been stupid to talk up prospects of rate rises. In doing so he tightened monetary policy. He probably thought that was the right thing to do but we now know he was wrong.

Steven_L said...

Low inflation and low interest rates are a sign that money has been too tight in the past.

So official RPI/CPI inflation is a sign that monetary policy was too tight in the past. OK, so far so good. So house price inflation of several times the 2% CPI target - and as much as 10% per annum in many parts of the south - is a sign of what exactly? To few houses? Too many people? Rising bond prices, rising equity prices?

Lower prices on consumer goods are purely a monetary phenomenon (as Mr Friedman said it once so it must be an absolute truth) and nothing to do with productivity gains, globalisation, Chinese state subisidy to industry and fx controls. No, the fact top notch electrical goods are getting cheaper is purely down to Mervyn King buggering up monetary policy years ago?

Yet massive inflation in asset prices isn't 'inflation' because the ONS say it's now. While we engage in this remarkable exercise is doublethink, let's just conveniently forget what Mr Friedman actually said:

Inflation is always and everywhere a monetary phenomenon the sense that it is and can be produced only by a more rapid increase in the quantity of money than in output ...

Notice he didn't say:

CPI as measured by the UK ONS is always and everywhere a monetary phenomenon the sense that it is and can be produced only by a more rapid increase in the quantity of money than in output ...

or

Inflation is always and everywhere - except for inflation in asset prices - a monetary phenomenon the sense that it is and can be produced only by a more rapid increase in the quantity of money than in output ...

And Carnage is not stupid, you are a fool if you think that. He is not a consumer protection regulator. He has no remit there. He is a macro prudential banking regulator. His job is to protect the banking system, and encouraging consumers to fix their mortgages achieves this end.

E-K said...

Good to see you back, Blue.

Thanks to all.

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