The evidence strongly suggests that they don’t know what they are doing. For example, a year ago they said “Over the remainder of 2021 and 2022, we expect CPI inflation to remain a little below the MPC’s 2 per cent target, as the rise in unemployment dampens wage growth, outweighing the effects of higher oil prices. Thereafter, CPI inflation rises gradually back to target by 2025 as the economy recovers.”
The evidence strongly suggests that they don’t know what they are doing. For example, a year ago they said “Over the remainder of 2021 and 2022, we expect CPI inflation to remain a little below the MPC’s 2 per cent target, as the rise in unemployment dampens wage growth, outweighing the effects of higher oil prices. Thereafter, CPI inflation rises gradually back to target by 2025 as the economy recovers.”
R Wright
1 year ago
This article is predicated on the nonsensical assumption that they don’t know exactly what they are doing. This is not ignorance, it is deception.
Mike Cook
1 year ago
and no mention of the not inconsiderable cost of Net Zero
Mike Cook
1 year ago
and no mention of the not inconsiderable cost of Net Zero
Peter B
1 year ago
The other point overlooked in the simplistic modelling [by the likes of the OBR] here is that taking a larger loan for a more expensive house means a higher repayment. So higher house prices combined with higher interest rates both act to reduce disposable income (as does general inflation). This problem has been building up for at least 25 years and it’s not going to quietly self-correct.
If the idea of raising interest rates to curb inflation is that it does so by taking money out of general circulation, wouldn’t tax rises achieve the same effect? Why can’t the government simply raise tax rates and use the money to shrink the deficit instead of handing that money over to the banks?
In either case, what annoys me about these policy-level discussions is that they are conducted without ever mentioning the colossal human costs. Whether it’s rising rates or rising taxes, the effect is that inflation is curbed by making millions of working, earning people poorer, and a significant chunk of them actually unemployed.
It reminds me a little of some of the medieval treatments for diseases which did little except to kill both the patient and the disease in the faint hope that the patient might last just a little longer than the disease and consequently effect a cure.
We seem still to be in economic dark ages where monetary policy is concerned. There is a better way to control inflation, and it’s simply to produce more from the same amount ofm human effort. I say “simply” but of course nobody actually knows yet how to produce such an outcome through deliberate policy: it is always something that is recognised to have occurred in retrospect by policymakers, usually accompanied by sighs of relief and then attempts to claim the credit for it.
But we do know that certain factors are essential for it to occur: innovation, whether it’s obvious in the form of new inventions, or the more pedestrian variety in which constant effort by entrepreneurs finds more efficient ways to utilise existing resources – this is what increases productivity. We just have no control – as yet at least – over the size and timing of the longed-for benefits this brings.
You would think, however, that even allowing for this, policymakers would at least avoid onerous taxation policy that makes innovators think twice about investing their time and money in this way. Alas, we seem now to have people in charge who think that subjecting millions of mortgage payers and taxpayers to economic torture is something that they can debate openly as if it’s a purely abstract exercise. Personally, I suspect we’d get better performance from our government if we just fired half of them so that they had fewer people to cross-check their ideas with and just let markets decide how good they are.
Innovation and productivity are indeed the keys. Government is incapable of either. They can only regulate and obstruct to a greater or lesser degree.
As we have seen around the world with lockdowns, closing enterprise down was executed quickly and totally by governments. That’s their competency. Creating enterprise isn’t.
Innovation and productivity are indeed the keys. Government is incapable of either. They can only regulate and obstruct to a greater or lesser degree.
As we have seen around the world with lockdowns, closing enterprise down was executed quickly and totally by governments. That’s their competency. Creating enterprise isn’t.
In either case, what annoys me about these policy-level discussions is that they are conducted without ever mentioning the colossal human costs. Whether it’s rising rates or rising taxes, the effect is that inflation is curbed by making millions of working, earning people poorer, and a significant chunk of them actually unemployed.
It reminds me a little of some of the medieval treatments for diseases which did little except to kill both the patient and the disease in the faint hope that the patient might last just a little longer than the disease and consequently effect a cure.
We seem still to be in economic dark ages where monetary policy is concerned. There is a better way to control inflation, and it’s simply to produce more from the same amount ofm human effort. I say “simply” but of course nobody actually knows yet how to produce such an outcome through deliberate policy: it is always something that is recognised to have occurred in retrospect by policymakers, usually accompanied by sighs of relief and then attempts to claim the credit for it.
But we do know that certain factors are essential for it to occur: innovation, whether it’s obvious in the form of new inventions, or the more pedestrian variety in which constant effort by entrepreneurs finds more efficient ways to utilise existing resources – this is what increases productivity. We just have no control – as yet at least – over the size and timing of the longed-for benefits this brings.
You would think, however, that even allowing for this, policymakers would at least avoid onerous taxation policy that makes innovators think twice about investing their time and money in this way. Alas, we seem now to have people in charge who think that subjecting millions of mortgage payers and taxpayers to economic torture is something that they can debate openly as if it’s a purely abstract exercise. Personally, I suspect we’d get better performance from our government if we just fired half of them so that they had fewer people to cross-check their ideas with and just let markets decide how good they are.
If the idea of raising interest rates to curb inflation is that it does so by taking money out of general circulation, wouldn’t tax rises achieve the same effect? Why can’t the government simply raise tax rates and use the money to shrink the deficit instead of handing that money over to the banks?
There is no mention of a property price crash which must e a potential outcome
Peter B
1 year ago
The other point overlooked in the simplistic modelling [by the likes of the OBR] here is that taking a larger loan for a more expensive house means a higher repayment. So higher house prices combined with higher interest rates both act to reduce disposable income (as does general inflation). This problem has been building up for at least 25 years and it’s not going to quietly self-correct.
Brian Villanueva
1 year ago
There are 2 other things going on here:
1) Prior to COVID, price was inversely related to urban geographical proximity. The work-from-home boom altered that, allowing more distant properties to appreciate significantly. Hence, higher median home price nationally.
2) There’s some evidence that home prices were simply more responsive to COVID inflationary pressures than other assets. Other durable assets like cars shot up a year ago. Broad inflation appeared about 9 months ago. Wages are starting to show an increase now.
In other words, this will likely solve itself as mortgage rates rise and wages adjust to inflation.
Brian Villanueva
1 year ago
There are 2 other things going on here:
1) Prior to COVID, price was inversely related to urban geographical proximity. The work-from-home boom altered that, allowing more distant properties to appreciate significantly. Hence, higher median home price nationally.
2) There’s some evidence that home prices were simply more responsive to COVID inflationary pressures than other assets. Other durable assets like cars shot up a year ago. Broad inflation appeared about 9 months ago. Wages are starting to show an increase now.
In other words, this will likely solve itself as mortgage rates rise and wages adjust to inflation.
polidori redux
1 year ago
“If the OBR cannot see that this situation is introducing a very high risk of a mortgage crisis, they should realise that the forecasting game isn’t for them.”
The OBR is a political organisation.
polidori redux
1 year ago
“If the OBR cannot see that this situation is introducing a very high risk of a mortgage crisis, they should realise that the forecasting game isn’t for them.”
The OBR is a political organisation.
This article is predicated on the nonsensical assumption that they don’t know exactly what they are doing. This is not ignorance, it is deception.
The evidence strongly suggests that they don’t know what they are doing. For example, a year ago they said “Over the remainder of 2021 and 2022, we expect CPI inflation to remain a little below the MPC’s 2 per cent target, as the rise in unemployment dampens wage growth, outweighing the effects of higher oil prices. Thereafter, CPI inflation rises gradually back to target by 2025 as the economy recovers.”
The evidence strongly suggests that they don’t know what they are doing. For example, a year ago they said “Over the remainder of 2021 and 2022, we expect CPI inflation to remain a little below the MPC’s 2 per cent target, as the rise in unemployment dampens wage growth, outweighing the effects of higher oil prices. Thereafter, CPI inflation rises gradually back to target by 2025 as the economy recovers.”
This article is predicated on the nonsensical assumption that they don’t know exactly what they are doing. This is not ignorance, it is deception.
and no mention of the not inconsiderable cost of Net Zero
and no mention of the not inconsiderable cost of Net Zero
The other point overlooked in the simplistic modelling [by the likes of the OBR] here is that taking a larger loan for a more expensive house means a higher repayment. So higher house prices combined with higher interest rates both act to reduce disposable income (as does general inflation). This problem has been building up for at least 25 years and it’s not going to quietly self-correct.
If the idea of raising interest rates to curb inflation is that it does so by taking money out of general circulation, wouldn’t tax rises achieve the same effect? Why can’t the government simply raise tax rates and use the money to shrink the deficit instead of handing that money over to the banks?
In either case, what annoys me about these policy-level discussions is that they are conducted without ever mentioning the colossal human costs. Whether it’s rising rates or rising taxes, the effect is that inflation is curbed by making millions of working, earning people poorer, and a significant chunk of them actually unemployed.
It reminds me a little of some of the medieval treatments for diseases which did little except to kill both the patient and the disease in the faint hope that the patient might last just a little longer than the disease and consequently effect a cure.
We seem still to be in economic dark ages where monetary policy is concerned. There is a better way to control inflation, and it’s simply to produce more from the same amount ofm human effort. I say “simply” but of course nobody actually knows yet how to produce such an outcome through deliberate policy: it is always something that is recognised to have occurred in retrospect by policymakers, usually accompanied by sighs of relief and then attempts to claim the credit for it.
But we do know that certain factors are essential for it to occur: innovation, whether it’s obvious in the form of new inventions, or the more pedestrian variety in which constant effort by entrepreneurs finds more efficient ways to utilise existing resources – this is what increases productivity. We just have no control – as yet at least – over the size and timing of the longed-for benefits this brings.
You would think, however, that even allowing for this, policymakers would at least avoid onerous taxation policy that makes innovators think twice about investing their time and money in this way. Alas, we seem now to have people in charge who think that subjecting millions of mortgage payers and taxpayers to economic torture is something that they can debate openly as if it’s a purely abstract exercise. Personally, I suspect we’d get better performance from our government if we just fired half of them so that they had fewer people to cross-check their ideas with and just let markets decide how good they are.
Innovation and productivity are indeed the keys. Government is incapable of either. They can only regulate and obstruct to a greater or lesser degree.
As we have seen around the world with lockdowns, closing enterprise down was executed quickly and totally by governments. That’s their competency. Creating enterprise isn’t.
Innovation and productivity are indeed the keys. Government is incapable of either. They can only regulate and obstruct to a greater or lesser degree.
As we have seen around the world with lockdowns, closing enterprise down was executed quickly and totally by governments. That’s their competency. Creating enterprise isn’t.
Because Gordon Brown, the gift that keeps on giving, gave the Bank independence and sole control of interest rates.
In either case, what annoys me about these policy-level discussions is that they are conducted without ever mentioning the colossal human costs. Whether it’s rising rates or rising taxes, the effect is that inflation is curbed by making millions of working, earning people poorer, and a significant chunk of them actually unemployed.
It reminds me a little of some of the medieval treatments for diseases which did little except to kill both the patient and the disease in the faint hope that the patient might last just a little longer than the disease and consequently effect a cure.
We seem still to be in economic dark ages where monetary policy is concerned. There is a better way to control inflation, and it’s simply to produce more from the same amount ofm human effort. I say “simply” but of course nobody actually knows yet how to produce such an outcome through deliberate policy: it is always something that is recognised to have occurred in retrospect by policymakers, usually accompanied by sighs of relief and then attempts to claim the credit for it.
But we do know that certain factors are essential for it to occur: innovation, whether it’s obvious in the form of new inventions, or the more pedestrian variety in which constant effort by entrepreneurs finds more efficient ways to utilise existing resources – this is what increases productivity. We just have no control – as yet at least – over the size and timing of the longed-for benefits this brings.
You would think, however, that even allowing for this, policymakers would at least avoid onerous taxation policy that makes innovators think twice about investing their time and money in this way. Alas, we seem now to have people in charge who think that subjecting millions of mortgage payers and taxpayers to economic torture is something that they can debate openly as if it’s a purely abstract exercise. Personally, I suspect we’d get better performance from our government if we just fired half of them so that they had fewer people to cross-check their ideas with and just let markets decide how good they are.
Because Gordon Brown, the gift that keeps on giving, gave the Bank independence and sole control of interest rates.
There is no mention of a property price crash which must e a potential outcome
If the idea of raising interest rates to curb inflation is that it does so by taking money out of general circulation, wouldn’t tax rises achieve the same effect? Why can’t the government simply raise tax rates and use the money to shrink the deficit instead of handing that money over to the banks?
There is no mention of a property price crash which must e a potential outcome
The other point overlooked in the simplistic modelling [by the likes of the OBR] here is that taking a larger loan for a more expensive house means a higher repayment. So higher house prices combined with higher interest rates both act to reduce disposable income (as does general inflation). This problem has been building up for at least 25 years and it’s not going to quietly self-correct.
There are 2 other things going on here:
1) Prior to COVID, price was inversely related to urban geographical proximity. The work-from-home boom altered that, allowing more distant properties to appreciate significantly. Hence, higher median home price nationally.
2) There’s some evidence that home prices were simply more responsive to COVID inflationary pressures than other assets. Other durable assets like cars shot up a year ago. Broad inflation appeared about 9 months ago. Wages are starting to show an increase now.
In other words, this will likely solve itself as mortgage rates rise and wages adjust to inflation.
There are 2 other things going on here:
1) Prior to COVID, price was inversely related to urban geographical proximity. The work-from-home boom altered that, allowing more distant properties to appreciate significantly. Hence, higher median home price nationally.
2) There’s some evidence that home prices were simply more responsive to COVID inflationary pressures than other assets. Other durable assets like cars shot up a year ago. Broad inflation appeared about 9 months ago. Wages are starting to show an increase now.
In other words, this will likely solve itself as mortgage rates rise and wages adjust to inflation.
“If the OBR cannot see that this situation is introducing a very high risk of a mortgage crisis, they should realise that the forecasting game isn’t for them.”
The OBR is a political organisation.
“If the OBR cannot see that this situation is introducing a very high risk of a mortgage crisis, they should realise that the forecasting game isn’t for them.”
The OBR is a political organisation.