tag:blogger.com,1999:blog-2948538160252327076.post649423058049707836..comments2023-11-02T15:48:50.381+00:00Comments on UK Bubble UK Economy: John Major shows the wayAlice Cookhttp://www.blogger.com/profile/05753570123987780947noreply@blogger.comBlogger17125tag:blogger.com,1999:blog-2948538160252327076.post-4692235436534827762008-07-22T08:51:00.000+01:002008-07-22T08:51:00.000+01:00House prices are up 20 times in 30 years, this jus...House prices are up 20 times in 30 years, this just has to mean a crash in a deleveraging phase, see this post for an explanation:<BR/>http://arabianmoney.net/2008/07/22/why-did-global-real-estate-become-so-expensive/<BR/>Major of course over did the nasty medicine and put millions out of work, including this writer.Unknownhttps://www.blogger.com/profile/00194297401208851574noreply@blogger.comtag:blogger.com,1999:blog-2948538160252327076.post-70901878221065512152008-07-21T13:08:00.000+01:002008-07-21T13:08:00.000+01:00Mark.I saw those comments by Eddie George. He seem...Mark.<BR/><BR/>I saw those comments by Eddie George. He seems to have settled the "dishonest or merely incompetent" question<BR/><BR/>NickAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-2948538160252327076.post-57562055766376938862008-07-21T12:06:00.000+01:002008-07-21T12:06:00.000+01:00You missed the most important VI off this list:Bac...You missed the most important VI off this list:<BR/><BR/><I>Back in the late 1980s, the UK went through a housing market inspired boom. Like our bubble, it was caused by excessive credit growth, irresponsible banks, and a UK public obsessed by making easy money on housing speculation.</I> <BR/><BR/>Namely ... The Government! Altho' Nulab have taken this to extremes, the Tories tried it as well under Barber and Lawson - stoking a housing boom is relatively easy, and creates the illusion of wealth and so on, but it always goes *pop* in the end.<BR/><BR/>I am gathering evidence to show that Nulab actually colluded in all this (Eddie George's comments to a Treasury Select Committee a year ago and lax supervision of Northern Rock, for example).Mark Wadsworthhttps://www.blogger.com/profile/07733511175178098449noreply@blogger.comtag:blogger.com,1999:blog-2948538160252327076.post-72977239494669169942008-07-21T11:51:00.000+01:002008-07-21T11:51:00.000+01:00woody finch is right.Alice the time to raise rates...woody finch is right.<BR/><BR/>Alice the time to raise rates was 2 years ago. We did not and now we are screwed.<BR/><BR/>Money supply will drop sharply in the next few months as it is a following indicator, just like inflation and unemployment.<BR/><BR/>raising interest rates now would be gross misconduct; this inflation is real, not home grown but malthusian for the moment.<BR/><BR/>Rates should be more or less where they are. I note RPI is stready even as CPI rises.<BR/><BR/>Do you accept that the fall in real wages of people will be hugely deflationary for the economy, together with their savings (house prices for most people and pension pots which are down 20% with the FTSE).<BR/><BR/>CUCityUnslickerhttps://www.blogger.com/profile/15929544047783163175noreply@blogger.comtag:blogger.com,1999:blog-2948538160252327076.post-88604144063568303122008-07-21T11:37:00.000+01:002008-07-21T11:37:00.000+01:00Alice,The thesis seems to be that the Major govern...Alice,<BR/>The thesis seems to be that the Major government raised rates which led to a fall in M4 and then a fall in inflation.<BR/><BR/>The truth is not so neat. Inflation peaked in the 3rd quarter of 1990 at 10.4% and it was at this very point when they started aggressively cutting rates to try and stave of recession. They were steadily cut from around 14% to 8% over the next 2 years. And despite this, as your graph shows, M4 growth and inflation both collapsed.<BR/><BR/>What happened there? Why didn't monetary growth and inflation explode as you would have predicted?<BR/><BR/>And aren't we now in a similar situation? We are experiencing some inflationary pressures, but monetary conditions have tightened significantly, the housing market is crashing and all the signs are of an impending slowdown in growth. <BR/>If we did it the Major way surely we would now been slashing rates aggressively, not raising them as you suggest?Woody Finchhttps://www.blogger.com/profile/00158968392312442567noreply@blogger.comtag:blogger.com,1999:blog-2948538160252327076.post-85257728181908771462008-07-21T03:36:00.001+01:002008-07-21T03:36:00.001+01:00Sorry "too much money chasing too few goods".Sorry "too much money chasing too few goods".Alice Cookhttps://www.blogger.com/profile/05753570123987780947noreply@blogger.comtag:blogger.com,1999:blog-2948538160252327076.post-14303216489178909302008-07-21T03:36:00.000+01:002008-07-21T03:36:00.000+01:00asteve,My preferred measure of the money supply is...asteve,<BR/><BR/>My preferred measure of the money supply is household holdings of m4. This measure is closely associated with the concept of "too much goods chasing too few goods"<BR/><BR/>AliceAlice Cookhttps://www.blogger.com/profile/05753570123987780947noreply@blogger.comtag:blogger.com,1999:blog-2948538160252327076.post-68911277692435306262008-07-21T03:32:00.000+01:002008-07-21T03:32:00.000+01:00Nick,Important point - the growth of m4 is inflati...Nick,<BR/><BR/>Important point - the growth of m4 is inflation. The CPI/RPI are crude attempts to estimate the inflation rate. <BR/><BR/>There is no particular reason why inflation should correlate with recessions. Economic growth is determined by such factors as labour supply, productivity growth, and similar factors.<BR/><BR/>Monetary growth in the long run determines only the price level.<BR/><BR/>AliceAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-2948538160252327076.post-62566759788684966222008-07-21T02:34:00.000+01:002008-07-21T02:34:00.000+01:00I'm not entirely happy about the top graph. The i...I'm not entirely happy about the top graph. The implication (although to your credit you don't say it) is that the Bank of England has been slower to respond to rising prices than it was last time around.<BR/><BR/>Well, it all depends on where you start. 1988 was the year when people woke up to the fact that there was an inflation problem and that interest rates had to go up. This time around I would say it was 2007 at the earliest.<BR/><BR/>But on the general point about dithering I quite agreeAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-2948538160252327076.post-7964357019107047752008-07-20T23:25:00.000+01:002008-07-20T23:25:00.000+01:00Nick, I agree.http://www.bankofengland.co.uk/mfsd/...Nick, I agree.<BR/><BR/>http://www.bankofengland.co.uk/mfsd/iadb/notesiadb/M4.htm<BR/><BR/>Two examples of components of the M4 figure are:<BR/><BR/>1. commercial paper, bonds, FRNs and other instruments of up to and including five years’ original maturity<BR/>2. 95% of the domestic sterling interbank difference.<BR/><BR/>I don't have a clue what is meant by the second component, but the first clearly includes a vast array of bonds and asset backed securities. I presume that these bonds are counted at face value for M4 - even though the value of the very best bonds have been given a haircut of between 10% and 30% in the context of the BoE Special Liquidity Scheme. I also suspect that this component of M4 has swelled as banks are forced to accept SIV assets back onto their balance sheets.... I am lead to believe that, for years, many of these have not counted as part of M4...Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2948538160252327076.post-14646394435497215692008-07-20T21:59:00.000+01:002008-07-20T21:59:00.000+01:00Good discussion Alice. I think M4 is the wrong mea...Good discussion Alice. I think M4 is the wrong measure because it doesn't correlate with recessions. But nonetheless a very thought provoking piece and good use of statistics.<BR/><BR/>NickAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-2948538160252327076.post-69007598978355446582008-07-20T19:59:00.000+01:002008-07-20T19:59:00.000+01:00Although I think Major was entirely wrong on the E...Although I think Major was entirely wrong on the EU - it can't be moderated or trusted - I have often thought he was hugely underrated. Major was svery resilient man in an impossible political position - completely divided party, virtually no majority - whereas Blair was (in my view) a weak man in an enormously strong position. It'll be interesting to see what the historians say in a few years' time.Sackersonhttps://www.blogger.com/profile/09410040031410954403noreply@blogger.comtag:blogger.com,1999:blog-2948538160252327076.post-25698200061739641592008-07-20T19:13:00.000+01:002008-07-20T19:13:00.000+01:00Many thanks Alice for your investigation into infl...Many thanks Alice for your investigation into inflation and deflation.<BR/><BR/>One thing worries me. Who benefits from inflation? Debtors benefit over time, because their real debt is inflated into insignificance.<BR/><BR/>Who are the debtors? House buyers and credit card users, banks and government. Hmm! What is the incentive for the government to save the savers?<BR/><BR/>A DavidAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-2948538160252327076.post-31200320027052252182008-07-20T19:04:00.000+01:002008-07-20T19:04:00.000+01:00Ireland should make an interesting study. What hap...Ireland should make an interesting study. What happens there? Since they can not set interest rates independently anymore.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2948538160252327076.post-3115471776953723572008-07-20T15:07:00.000+01:002008-07-20T15:07:00.000+01:00A feast - thanks this, Alice, its hugely informati...A feast - thanks this, Alice, its hugely informative.<BR/><BR/>Slim: Yes indeed, Major was a hero of the piece, in the end. after the ERM fiasco, the last conservative government bit the bullet firmly and squeezed the excess out of the system. It did for their popularity (along with the sleeze) but that monetary tightening laid the foundation for all of the Blair-Brown government's easy ride.<BR/><BR/>B. in C.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2948538160252327076.post-57041794792859013872008-07-20T14:19:00.000+01:002008-07-20T14:19:00.000+01:00Dear Alice,MORE GOOD NEWS:From The TimesJuly 19, 2...Dear Alice,<BR/><BR/>MORE GOOD NEWS:<BR/><BR/>From The Times<BR/>July 19, 2008<BR/>House prices tipped to fall 20% in two years<BR/><BR/>http://www.timesonline.co.uk/tol/money/property_and_mortgages/article4360193.ece<BR/><BR/>KEEP ON WITH THE GOOD WORK.<BR/><BR/>RAMBOAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-2948538160252327076.post-30026996746862759642008-07-20T13:19:00.000+01:002008-07-20T13:19:00.000+01:00Major? A hero?Major? A hero?Anonymousnoreply@blogger.com