I posted this twitter thread from Danny Blanchflower and myself this morning:
As I mentioned last evening, @d_blanchflower and I talked last night about what we would do this morning if we had, by some weird process, been appointed Governor of the Bank of England and Chancellor overnight. Here are some big ideas, in a thread. More will follow….
I stress, neither of us are looking for jobs, but imagining the responsibilities of these posts helps focus the mind when discussing policy issues. We had a serious discussion, and a lot of ideas.
First, we decided to agree what our strategy was. Two days ago we might have still been in the mood to defend the pound. But after the fiascos of the last two days - including the £65bn bailout for pension funds and the mortgage market meltdown we were no longer so sure.
So, we moved on from a policy of ‘Protect the pound' to one of ‘Protect the people, their homes, their children, their pensions, and public services', or ‘Protect people' for short. Getting off the gold standard really helped in the 1930s. Changing the goalposts now would have the same effect.
This changed the way we looked at issues. So we immediately relaxed some of the assumptions that we think the Bank of England might prioritise at present. So we decided we would not stop the pound from falling to parity with the dollar, or try to keep inflation to 2%.
As a result we decided to just let the pound float. That might be inflationary, and maybe it will not: it's very hard to tell. But we decided it was not worth sacrificing the well-being of people to keep the value of the pound above $1, which is a financial vanity project.
Then we agreed that the 2% inflation is purely arbitrary. It is simply a number that was chosen by the Bank of New Zealand, way back. 4% could be used just as easily, and the consequence was that we might be able to keep interest rates lower, and so ensure people stayed in their homes. We thought homes were the priority.
A lot of other issues were debated, like the desirability of protecting and expanding support for public services - which has to mean decent pay rises for those working in them since paying people is the biggest cost in all these services.
And, as we agreed, if you want to expand the economy when consumer confidence is at rock bottom (as it is right now, being at the lowest level since records begin in 1974) just about the only thing a government can do is spend more on providing more of its own services.
So, supporting those services rather than cutting them became a priority.
But, the obvious question is, how would we fund this? First of all, by keeping the already planned deficit in place, and probably expanding it as noted to support public services.
And we'd also keep the energy support package in place - although with some additional measures to ensure the best off do not benefit, as noted below.
Then we'd cancel the tax cuts for the wealthy. And we'd also put corporation tax up, as previously planned. But, we would also increase tax reliefs for investment, job creation and training. With a higher tax rate these are worth more, and so change behaviour more effectively.
We would also have a bigger windfall tax on energy companies. The situation demands it.
And we would reinstate the bankers' bonus cap: good regulation demands that we should do so.
We would then align capital gains tax rates with income tax rates, because right now the wealthy need to make their fair contribution to society and they aren't.
And to make sure that the energy cost support being paid to the wealthy was recovered from those who do not need it we would add at least five new bands to the top of the council tax system. The absurd cap on these bills has to go, and this is the time to do it.
We would encourage similar measures in devolved countries so that expensive properties are taxed a great deal more than now right across the UK.
It was tempting to look at inheritance tax, but the answer is not yet to that one: it is too complicated.
However, it would be easy to both reinstate the 45% tax rate and introduce national insurance at the full rate paid by those with earnings up to £50,000 for those earning above £80,000, which we think would be fair.
And we stress, fairness as well as revenue are the focus of these measures: this package has to be seen to be redistributive.
So, how to achieve that goal for the people who need support?
First, the full pension and benefits upgrades due next year should be paid. The triple lock should be protected.
Second, the £20 cut to universal credit should be restored.
We would also look at an addition child allowance, but we also think all children should be treated equally: they too have their rights and discrimination should not impact them. So we think every child at a state school should have a free breakfast and lunch if they want it, and free summer school too.
There is proven education and social advantage to these schemes to help children.
What then? There are, of course, interest rate issues to look at. We agreed that the key issue which spooked markets was that Kwarteng and the Bank between them asked for more money than had ever been proposed before.
The absolute first thing to do would be to make clear that there would never be anything remotely close to a 6% Bank of England base rate, whenever the markets might think, because that would crash the mortgage market and that is utterly unacceptable.
Then the markets need to be addressed. The combined deficit announced and quantitative tightening (reversing QE) package announced last week came to around £300 billion. This was well beyond any sum previously sought in a year. Of course markets were spooked. So what would we do?
First, we'd have the Bank of England cancel the quantitative tightening programme. It's just not going to happen anyway, so that needs to be said now.
And then we agreed the amount of debt to be issued was still too much for the markets if we wanted to keep interest rates down so that people could stay in their homes. How to address this? By reducing the value of bonds to be issued, of course.
This could be done very easily. If we had our way the Treasury would be issuing new Energy Bonds on Monday. We might do £10 billion of these a week for teen weeks . And each Friday we'd have the Bank of England buy the whole lot back from the financial markets.
This is quantitative easing (QE), of course, and unashamedly so. We have a national emergency. We proved in 2009, 2020 and 2021 that QE is needed to address crises. We'd do it again.
The £100 billion is the approximate cost of the energy support package - hence the name of the bonds.
And for those who say no one else has done anything like this, the US Federal Reserve has been buying mortgage securities precisely so that people can stay in their homes, which is what this programme we propose is also all about.
We are guessing £100bn is sufficient, together with the end of QT, to take all the stress out of the bond market. They were already expecting to buy up to £100 billion of bonds next year to cover deficits anyway: that's all we would also be asking them to do after these changes.
By now, in effect we would have neutered Kwarteng's mess. As a result we would suggest cuts in future interest rates to be our aim. And we'd say having the functioning economy that this would permit would be decidedly preferable to one with housing, employment and economic crises.
We'd even suggest cautious growth might happen. This would come from extra government spending. Consumer markets will only follow when people have the confidence government is on their side again. That's another reason for supporting those public services again now.
Doing all this would take the stress out of millions of people's lives, keep mortgage markets under control and (maybe) reduced inflationary pressure whilst significantly increasing the chance of growing tax yields.
We stress, this is the short-term agenda. There would be much more to do, including green investment programmes, restructuring some aspects of the Bank of England's reserves operations, looking more fundamentally at the Bank of England mandate and more tax reform.
But we think that the markets, the country, and people living in fear need to realise that there is a way out of where we are now if only people and not inflation or interest rate targets were made the priority of policy. So the aim of this package is to reignite some confidence.
We think it would do that and provide a platform for change in the economy. That's why we're putting this out now.
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Refreshing. A little hope restored that things can be done differently. Thank you.
“hurry”
The short temr measures look fine: Some medium to longer measures.
1. Price nat gas at cost of extraction (=+/- £20/MWh) or,
2. build an alternative. Example: Rockwool has a factory near Bridgend that produces insulation products. It uses natural gas – & things are not good at the moment – for obvious reasons. The West end of the Bristol Channel has wonderful winds and shallowish waters. A GW-class off-shore wind farm was planned – but never got built. Expand the famr to say 4 or 5GW – produce H2 on-site and pipe to Rockwool & reconfiged Port Talbot steel works for direct reduction of iron ore to steel. The owner of the farm could be the state-owned power company that Liebore has proposed forming. H2 from such a facility would be cost competitive with nat gas prices at around £40/MWh. Low carbon insulation produced using green-H2 would fit nicely with an expanded home insulation programme.
Welsh prosperity used to be founded on coal (although the locals never saw much benefit). Perhaps this time around, the prosperity could be spread around instead of thrown away by assorted aristos who owned the coal mines.
Truss talks as if the Conservatives have fixed the energy problem. They have fixed nothing. They have merely handed over massive amounts of borrowed money to the oil and gas producers, and will not tax their extravagent windfall profits.
Only a transformation of the domestic energy market to serve the British people first (not at international prices, but cost plus a reasonable, regulated turn) will stop us hemorrhaging vast amounts of public money, for no return.
Very strongly agreed
Isn’t Ecotricity around that area, English side, not Welsh? I wonder if Dale Vince would like to join that group.
Ecotricity is in Stroud. Dale Vince, who is planning a move from the company into politics, gave an interesting talk to the HoC Environmental Audit Committee in June covering:
Why fossil fuels can’t give us energy security
Why nuclear is too slow and too costly, never mind the waste problem
How our cheapest, fastest and cleanest energy options – onshore wind and sun –are hamstrung by a hostile planning environment
Why we urgently need to tackle energy efficiency in Britain’s homes
Why heat pumps aren’t the answer to household heating
Why we need to end all forms of subsidy for fossil fuels
How we can supply all of Britain’s gas needs by making sustainable gas from grass. (Ecotricity will complete its first green gas mill (from grass) this year).
Full transcript: https://committees.parliament.uk/oralevidence/10477/pdf/
Richard, you and Danny are working from a sane position but it’s a flawed view as the people in charge don’t want to save the economy or us. Tbf, they don’t give a flying f-ck about us, the IEA & others want disaster Capitalism. This is the Shock Doctrine being played out. Live.
I forgot to add, thank you for the work you do.
You are offering some very interesting ideas, notably on QE (the US/Democrat attempts to keep people in their homes now, I think goes back to the big mistake Obama made in backing Wall St., over Main St., on home foreclosures in the Crash, that led directly to the Tea Party – and Trump; i.e., ‘you can’t trust Washington’).
At a basic level I am astonished by the tension in what is happening; the BofE and Government are pulling in opposite directions. The BofE is raising interest rates (leave aside the logic), that squeezes growth; while the Government cuts taxes to pursue growth. From the perspective of a middle-england homeowner, it will look like this:
the energy cap Government investment limits the average energy user to £2,500 cost (not really a cap,because it is not a cost ceiling, although the Conservatives are unsurprisingly casual about meanings – naughty, naughty). Truss suggested in her bizarre run round radio stations that this “decisive action” saved the user from a £6,000 bill; so the average saving she claims is £4,500. Meanwhile the non-Budget has produced a market impact (you know, the market the Conservatives believe is a perfect and unanswerable economic instrument), that has obliged the Bof E to step in and ratchet up interest rates the market is already forcing upwards. Thus interest rates are expected to rise to 6%-7%, and this means increased mortgage costs of around £6,000 p.a.
Where does this leave the middle-england average homeowner? A £2,500 average energy bill (around double what users were pying last year); and a £6,000 rise in interest costs. So the homeowner is £8,500 p.a. worse off at the end; but benefits from a tax cut, that at £40,000 income is around £350. At the same time financial policy leads to the UK economy being pulled simultaneously in opposite directions. That’ll work!
According to the truly hapless Scottish Secretary (Alister Jack MP) this morning on BBC Radio GMS, the Government plan makes sense. He soon enough lost me, but I did feel he was simply reading a prepared text; I confess I wasn’t entirely sure he sounded as if he actually understood it.
Should be £7,250 p.a. worse off…….
A mere bagatelle, if you are sitting in Downing Street.
Agreed
I honestly think that the main aim of the Government is justify more cuts to the public sector under the guise of shoving money into the CoLC (or being seen to at least) and then pleading poverty to the electorate under the banner of ‘we can’t do everything’.
The way they have done it – by giving tax money back – is extremely clumsy and has clashed with the BoE and their arcane and limited views about controlling inflation. We know that tax has a role in controlling inflation caused by flows of money.
Truss and Kwarteng must have never thrown a pebble into a pond and watched the ripples is all I can say.
Their view of what they are doing is unacceptably narrow. They seem incapable of thinking holistically.
It’s the sort of thing you’d expect to see from a really inexperienced person. If it were my party, frankly I’d be embarrassed (as an end user of their policy I can assure you that I am furious).
Frankly the pair of them should be dismissed.
I referred to the Scottish Secretary, Alister Jack MP’s floundering performance on BBC Scotland GMS; it now seems the OBR is going to produce a forecast for the Chancellor by 7th October. Just this moring Alister Jack defended the Government on BBC GMS, ignoring an OBR assessment by claiming (to my astonishment) it would take “months” to produce.
The abject performance by Jack is underscored not just be his unsustinable timelines, but by the proposition that Truss and Kwarteng can cobble this set of proposals together not only without Tom Scholar (the most senior and highly experienced Permanent Sectretary in the Treasury), but without putting them together in conjunction with the OBR; so that we have something we may plausibly refer to as a (measured, thought through) Plan, and not a fag-packet exercise by amateurs.
Seems eminently sensible…. and above all, it is practical and could be implemented tomorrow.
A few points….
a) I don’t like the triple lock. Right now, I would raise pensions in line with inflation but the long term solution is to link pensions with earnings or possible the minimum wage. Breaking the link between pensions and earnings was a mistake – we are all (young and old) in the same boat and our prosperity should rise or fall together. The triple lock sows division.
b) I think raising the inflation target makes sense. Whilst inflation might be today’s problem, I think that in the long run demographic changes suggest deflation will re-emerge as a risk and one that is better managed with a higher inflation target. However, I would also favour a switch away from QE/QT as currently executed. Monetary policy has always targeted “price” (the o/n interest rate) with reserves added/drained to hit the target. Why would you do anything different for the long end? Create a target corridor for the yield curve and buy/sell gilts to meet those yield targets. There are some issues about “lines in the sand” but are easily solvable. If the BoE is getting it horribly wrong we would see it in the FX rate.
Noted
Remember this is meant to be for the next few weeks, with more refinement to follow
I seem to remember (it’s a long time ago) the triple lock was introduced quite deliberately because it was recognised the state pension had fallen behind its equivalent in more civilised countries. Rather than a large jump with its resultant budget disruption, the idea was for annual rises to fall at the upper limit of inflation measures, so there should be a positive drift.
The triple lock has now become totemic, which is not entirely healthy. But I think if it is to be dropped there needs to be some other mechanism to bring the pension up to a decent living sum.
Curve ball I guess.
But how much could the royal family contribute if tax laws were applied fairly?
Rob
Peanuts in the grand scheme of things in cash terms
Lots by making it clear that tax law applies to everyone
Agree with nearly all of this.
My suggested refinements would be.
Council tax is enormously unfair as millionaires in Chelsea pay less than low income households in Stockton. It should be a percentage of property values, redistributed on a per capita basis. For asset rich but income poor this could be paid as a share in the property.
National insurance is also unfair as it is not charged on incomes above a threshold or on private pensions so scrap it and replace with higher income tax that is charged an all income. This fits to your excellent principle that all income should be treated equally.
Would not introduce these overnight though, rather set a direction of travel.
We were going for what could be done quickly….
Appreciated but this is snowballing into an apparent manifesto. This perhaps illustrates the absence of political representation for just about everybody who isn’t either already an oligarch or approaching that status. I’d like to suggest no more futzing around with maintaining triple-locks and £20 uplifts and just double state pensions and universal credit. The purchasing power of basic benefits, I understand, is around 50% of what it was in the ’70s so there’s no good reason that value shouldn’t be restored. There ought to be enough capacity in the economy to be able to soak up the new money coming in and provide a lot of employent accordingly. If we’re looking too for ways to usefully input money into the economy then I’d suggest we ramp up in preparation for Long Covid. That and the subject of covid-related illness in general will dominate the coming years. I could go on, but… that’ll do for now 🙂
And how will that work?
I agree on the whole with the proposals and recognise that – as you yourself suggest – that some effects are difficult to predict.
I would just suggest introducing an additional tax on very high earners which could be done quickly. By this I mean those earning via basic salary, bonuses, dividends, etc., say £1m+ (the number could be debated and refined). At this level the tax should be c.70% or maybe 80%. The bankers, for example, got round the bonus cap by increasing basic salaries, highly paid executives via dividends, etc. The UK, for example, has the highest number of bankers in Europe taking (as I don’t really think they earn) £1m+ per annum.
The argument – certainly from the Tories – would be that the talent would leave the country, we couldn’t attract the best CEO’s etc. A number of countries in the world would evidence that this premise is nonsensical. Some might relocate…I would tend to put this in the category of good riddance to bad rubbish.
I would then follow this additional personal tax up with a tax reform (this isn’t immediately implementable) along the lines of what you have proposed in previous blogs. Part of that reform would be to mitigate the impacts of tax avoidance by global organisations. Some successful tax regimes that I have seen work quite effectively in this regard adopt an approach of a simple set of tax rules (Hong Kong is sometimes cited as an example) with their sheer simplicity making it difficult to avoid taxes and include elements along the lines of head office charges are the lowest of the actual head office charges (fully detailed out), c.1% of in-country revenues or c.3% of in-country profits. They also apply withholding taxes to other forms of intercompany charging or transfers, royalties, etc. In short, CEO’s, etc., may relocate to escape personal taxation but the company will be subject to additional taxation as they cannot write-down fully the costs of any overseas charges whether these are related to senior personnel, corporate legal costs, costs of overseas premises, etc.
My band ‘A’ flat in a well- heeled North Yorks town has a higher council tax rate than a band ‘D’ in RBKC. That is such gross unfairness repeated around the country.
Brilliant to do this overnight. What a strange world – where the HM Sec to the Treasury this morning so incoherent and more or less speak-your-weight dumb, when you and Danny and others out there with ideas and experience, and even the ‘orthodox’ OBR, NIESR, IFS, …just ignored in favour of dark money IEA head bangers.
A public announcement to stop defending the pound and not raising interest rates and letting inflation find its level – would be a massive political call . It shows how far the govt is away from what might get them out of their own mess. But maybe still risks a huge negative response by ‘the markets’?
The Energy Bonds seem to be the key innovative idea – to get us out of the immediate mess. Without it – the ‘markets’ might be still threatening to trash pension funds etc if we announce we are not raising rates and trying to limit inflation?
And maybe the Energy Bonds idea would be a vehicle to talk to the Opposition, and bring them kicking and screaming to think about the whole issue of tax/spend/borrowing/QE – that they are so scared to address. Without doing it they will still be trashing public services.
Telling the markets you don’t give a damn makes them lose interest
When the Tories defund the national public assets – education, energy, rail, water, health, care – they sell them off into the private sector. What is left?
Are they now preparing the final great fire sale, deliberately defunding the last natural resource – we, the people?
“When you aren’t the consumer you’re the product”, as the maxim goes.
No
Because that makes no sense
I think your switch from protecting the Pound to Protecting the People is the key to all rational Policy, short, medium and long term.
Poverty is deliberately maintained, and the poor are gaslighted in that they are assumed by be poor because they are flawed people. Poverty is maintained to drive poor people into accepting low paid work, in order to maximise Wealth Extraction.
Kwarteng cited in The Guardian : “Kwasi Kwarteng, the chancellor, has already announced plans to cut benefits to encourage more people into the job market, saying that this was part of the government’s plan to “make work pay” by not allowing people to rely solely on welfare as their main form of income.”
Iain Duncan Smith – “UBI is not the right response to COVID because it makes people less likely to work”
The Human Trauma of Poverty is something the poor know well, the middle class are generally unaware of what that trauma means.
1982 Cabinet Discussion Paper on Long Term Planning – reduce financial support, withdraw free health care, free education, reduce all social services in order to make ‘low paid work seem more attractive’ in order to maximise wealth extraction efficiency. They even admit the harm poverty causes in terms of increased petty crime, distress in peoples homes, deprivation in education and warn they have to be careful to not push people too far in ways that might undermine support for the Government.
Blairs PFI Oligarchy friendly Labour attenuated this but rejected abolishing poverty – they understood the need to maintain just enough poverty to keep people from ‘revolution’ – hence Working Tax Credits.
I look at policy and harms to the most vulnerable as my measure. Indeed, that is how I re-read History – “what is the meaning of the lived experiences of the most vulnerable as a result of the policy decisions of the most powerful.”
You must be aware of the 1982 Cabinet Discussion Paper.
https://c59574e9047e61130f13-3f71d0fe2b653c4f00f32175760e96e7.ssl.cf1.rackcdn.com/820906%20C%2882%29%2031%20%28129-215-230%29.pdf?
Released un the 30 year rule, in 2012.
It’s a truly shocking document.
Tell me it does not still inform the UK Ruling Class strategic stance.
I had not seen it
it is well worth the read, given the open ideological Thatcherite stance of Truss et al.
Some might argue it is out of date and irrelevant. Old hat etc. However, irrespective of who is in office (always temporary) those who sponsor them do plan long term. They have to.
For example the Fossil Fuel industry were well aware of implications of greenhouse gas before I was born (1959) and understood fully the liability and culpability of their subsequent action and inaction – do you believe they have not planned routes to evade democratic, legislative and civil accountability?
I would argue that document, which is verified as being genuine, makes good sense of what has been done since.
If China was able to operate a market economy and abolish poverty in the same time frame, why not the UK? It was a choice.
A previous commentator suggested we are living through Shock Doctrine.
It certainly looks like that.
The deliberate destruction of Corbyn (humane honesty accessing Power is the greatest fear of those who have long held the most power) fits this pattern.
The most difficult hurdle for the electorate to get over is the realisation that there are truly , nasty dangerous people in power – because to become fully conscious of that leaves two positions open.
Deny, keep head down, hope the axe does not fall on oneself, or take determined action to protect the people. For most it is much better to nor know or suspect the truth.
Evil is banal. It’s not exciting or mysterious, or god like – and it’s only as dangerous as our unwillingness to collectively confront it.
Clive is right you can control the yield curve through QE/QT.. that’s easy. And you can monetise the deficit and spend money on whatever you want. You are completely correct. You also state that there is absolutely no point in trying to intervene in currency markets. I completely agree are uncontrollable. You are also choosing to put public services at the forefront of your agenda. I agree it it laudable your do so at the expense of an inflationary target. And you hold the view that increasing the money supply does not impact on inflation.
So we have inflation and the currency as the floating variables and just let them
settle where they will. Obviously they relate closing as a weakening currency means importing inflation.
So what happens if sterling slides and inflation really takes a hold long term. What would your plan be then?
It won’t
There is no reason why it should
But if it dies it will reflect real economic conditions we could not buck anyway
So we address rebuilding the strength of the real economy
“So what happens if sterling slides and inflation really takes a hold long term. What would your plan be then?”
“it won’t”
IIn a forum of public debate that answer won’t hold up unfortunately
OK then – tell me why it will slide – because just as governments can’t beat markets forever markets can’t and don’t want to beat economic fundamentals
Tell me what is going to slide so badly in the UK in perpetuity so that the pound disappears without trace
The problem is yours, not mine, to suggest why
“OK then – tell me why it will slide”
Because increasing the money in circulation will increase prices. And with incessant printing and which international counterparts would own sterling? Especially with interest rates at zero and bond yields suppressed through QE.
There is no evidence of this anywhere in the world, including here from 2009 – 2021
This is a neoliberal fantasy of the sort now crashing the economy
Let’s deal in facts, shall we?
Richard, you appear not to understand how floating exchange rates work – linked to the differences in interest between the relevant currencies.
Controlling interest rates at close to zero, will mean your currency depreciates significantly compared to other currencies – importing inflation, given the extent to which we import goods and where things like energy is priced in USD.
It seems thst your suggestion will lead to inflation increasing and persisting, exacerbated by the expansion of the money supply that you are proposing.
This appears to go against all known economics?
Of course, Danny and I know nothing about economics. Obviously……
Mr Ross,
I am trying to understand your problem. It seems to me that if, given what you already accept, you still propose “what happens if sterling slides and inflation really takes a hold long term”, you are supposing that the UK has no recordable fundamentals at all, and nothing that anyone in the world actually wants or needs. In that case, what is the plan?
Emigrate?
May I suggest you are being a little whimsical?
I would agree with all that you are suggesting, however, I do think that the big elephant in the room of the UK economy, at least for the average person, is the cost of housing. Since 1979 the following three things have happened which I think have helped lead us to the nightmare scenario that we now face.
1) There really is little or no affordable housing in the UK anymore. Certainly not to buy, and the “affordable” sector is as rare as finding a Tory who cares.
https://www.comparethemarket.com/home-insurance/content/house-prices-vs-income-in-the-uk/
2) As house prices are not included in the inflation index, there has always been the risk that once we got an inflation shock, any rise in IR’s would hit home buyers hard who had stretched their finances to buy.
https://www.theguardian.com/money/2022/sep/27/uk-mortgages-rates-rise-stock-market-pound-kwarteng-mini-budget
One can argue that raising IR’s should not be happening, but that does not solve the underlying problem that ignoring house price inflation and the lack of affordable options means that sooner or later we were going to face the possibility of a monumental crash and correction that would have far reaching effects.
3) Since 1979, Government, mostly Tory have failed miserably to build more housing whether you want to call it affordable or otherwise. The Tories have come up with plenty of schemes to prop up the market when prices stall, but never followed through and built more housing. The Tories don’t even talk about building “affordable” housing anymore.
The chances are we are heading into a mortgage crisis now because just a slight move up in IR from say 2-4% will result in mortgage rates going from say 4 – 8 or 10%.
https://www.bbc.co.uk/news/av/uk-politics-63084380
That will financially kill a lot of people who leaved the dream and fantasy that house prices going up around 10% a year in an economy that supposedly had an inflation rate of 1-2% as normal.
We need a genuine commitment from someone to build affordable housing to rent. I also believe that the BoE should be charged with setting a minimum IR for house purchases, responding to house price inflation alone to try and have some control over house price inflation. However, I would have preferred that it happened 30-40 years ago rather than now. I know it will never happen.
We are where we are and when it comes to housing the obsession in the UK with house price inflation and the belief that it is a good thing or gives people a feelgood factor has been dangerous. A crash may well now happen as people default on their mortgages, although I still feel that the Tories will do whatever it takes to keep the housing bubble going, without ever admitting to it of course.
The easy answer is to say build more affordable housing, but does anyone trust Tory or Labour to do it given their total combined failure to do so over the last 40 years? I don’t.
The Green New Deal has always addressed this issue
And I hope that the opposition will adopt it, but the last 40 years suggest otherwise. I live in hope.
In the meantime I think that with IR’s going up and mortgage rates following, we face the prospect of a monumental crash, if not in prices, definitely in mortgage defaults and sales. There is a better way, but again it will require the opposition to be brave (my default is that the Tories will never do anything accept to try and keep the housing bubble going).
Gets my vote. How bad does it have to get before we embrace real change?
As bad as it will be
We are all familiar with the argument that “all power corrupts and absolute power corrupts absolutely” and we are also aware that in our increasingly monetized society the power derived from great wealth is increasingly destabilizing and nullifying power derived from democracy, but for some reason few seem able to see the corollary that “all wealth corrupts and great wealth corrupts absolutely”
If I am right, and the history of the West in the last forty years suggests I might be, then the first step we need to take is to do everything in our power to prevent the accumulation of great wealth.
This is what we did for the thirty-five years after WW2 and to quote a Tory Prime minister of the time, the people of this country have never had it so good.
Trying to understand all this with limited knowledge. If the BoE are now using QE to return and keep the base interest rate back to where it was, or whatever they want it to be, aren’t the mortgage and pension industries back to where they were before Kamikwasi’s special fiscal operation? Or are they still in crisis?
This is stacking plaster stuff without more aim than stopping the blood flowing at the moment
Systemic policy to address the issues is a long way off
If you can have low interest rates and low inflation without adversely impacting your currency, why isn’t this the chosen route for all economies?
The truth of course is that you can target one measure by actions on another, but the third will always be out of your control.
Which is why your proposals would lead to a run on the currency and massively imported inflation, as explained in economic textbooks.
Almost every economics text book is wrong, as the Bank of England noted not long ago
There are more variables in the equation by a long way
Danny and I are working on the other variables
But you are as wrong as obviously as your claim to be lovely is unsupported
Richard,
Which countries have successfully tried your approach of low interest rates and printing money to control inflation and maintain the value of their currencies?
Did you read what we wrote?
I’d be interested in a link to where the bank have said that it’s possible to print money to control inflation and protect the currency, but keeping interest rates low?
I think they’ve been quite explicit about the need to INCREASE rates to manage inflation and also protect the value of the currency, which is the exact opposite of what you are proposing.
Maybe you just haven’t understood what the Bank of England have said, but it’s certainly not what you are claiming!
Ask them furst to explain what they have dine this week, I suggest
Publish that and then I will get back to you