"Harry The Horse" wrote
Yup. IIRC Lawson was doing OK until he decided to join the ERM without telling anyone, and thus ended up managing the wrong thing - the exchange rate - when he should have been managing inflation. By having the BoE manage a spurious inflation target he has repeated the error with I suspect the same outcome.
On Sat, 14 May 2005 16:25:03 +0100, Chris Game mysteriously appeared thru the usenet mist to inform us thus...
If Cumbria wanted to kick start growth, it would benefit from having lower interest rates to compete with Surrey. It would be even better if it had its own currency!
Well quite. There's little growth in Greece because of too-high I/Rs imposed by the ECB, hence my previous comment.
"John Redman" wrote in message news:d65thc$hd6$ snipped-for-privacy@news8.svr.pol.co.uk...
But you still haven't said what he should or shouldn't have done. I agree that if he claims credit he can expect to take the blame, but I don't agree that in reality he had any control over this - the process was well underway before he came into office. Unless you want to argue that he *shouldn't* have given control of interest rates to the BofE of course.
KotF
The house price bubble was hardly started in 1997 - up to about 1995-6 house prices had been falling for 5-6 years and had only just starting rising slightly after stabilising.
He gave the BoE control of interest rates but *he* sets the inflation target they are aiming for! It's a bit like asking someone else to drive but telling them where you want to end up.
His original inflation measure specifically excluded mortgage costs (RPIX). He's now gone one better by using the CPI which excludes *all* housing costs (including council tax, conveniently).
"Andy Pandy" wrote
You beat me to it.
By having the BoE target "inflation" excluding house prices he ensured that interest rates would fall, a speculative bubble would develop in housing, and MEW would fuel his phoney boom. So the state we are in now reflects his poor decisions over the last 8 years.
He should have had the BoE target a measure of inflation that included a more effective reflection of the price of property - not the simple cost of serving the interest "average" mortgage debt, but the asset itself. If that meant interest rates doubled rather than house prices, so it goes. It would be better than what we now face.
It certainly would have been a good idea to include a component which reflected house prices - probably using the long-term average ratio of house-price to wages as a 'zero' in the proverbial 'basket of goods' and values either side of that to reflect a positive or negative bias to the overall inflation figure.
But, isn't it the CPI a European standard measure? - if so it seems unfair to blame Brown for moving any goalposts though admittedly CPI returns a lower figure than RPI and this of course added fuel to the fire. I'm not absolving Brown by the way - I think he makes a fine scapegoat.
"curiosity" wrote
Yep, but then again why does that make it better than RPI for the UK?
In so far as CPI when first adopted returned a lower figure than RPI without any corresponding lowering of our targets, it didn't improve matters at all and will have exacerbated the HPI problem. OTOH it's most unlikely that there'll be any further mucking about with future inflation indices - that's surely a benefit? The fact that the CPI is cobbled together in Brussels I don't see as being an issue. The RPI, as a local index was always going to be vulnerable to tampering and reformulation for political ends.
curiosity wrote in news: snipped-for-privacy@4ax.com:
I believe that people have the right to try to sell their property for the best price they can get but one they have agreed a price they should stick with it and not go back on their word. I don't see any contradiction there.
Andrew
snipped-for-privacy@jibbering.com (Jim Ley) wrote in news: snipped-for-privacy@news.individual.net:
Exactly, but the price the seller originally paid is irrelevent.
The principles of supply and demand pricing are a separate issue from the principles of sticking to a deal once it has been made.
Andrew
"curiosity" wrote
The same potentially applies to the CPI, though, no? And at least the RPI can be made to reflect the UK economy whereas the CPI approach is devised to suit the economy of other countries. The most obvious example of how inappropriate it is is that it ignores council tax, which is a pretty minor cost in, say, France, but has been ruthlessly hiked here to the point where the London average appears to be well into 4 figures. No doubt other abuses of it will emerge as Brown targets tax increases at things that won't feed into the CPI. ISTR Wilson doing exactly the same thing 30 years ago.
There is no contradiction, but there is none-the-less a moral value judgment being made by you and ultimately I believe this is purely a matter of practicalities arising from the adverse combination of an extremely volatile property market with an absurdly long process of committal where prices can vary significantly between offer and contract.
The system for trading in property in England is basically a crock of shit and it needs to be overhauled now. The simple remedy to counter gazumping/undering is to adopt the system used here and there very satisfactorily. You commit yourself early on in the process - 10 days or so - and you hand over your non-refundable deposit. That's it. Works a dream in France. Otherwise let the capitalist devil take the hindmost.
My instinct is that CPI would be far less vulnerable to reformulation. Whose ends would be satisfied by doing so? If you have a range of countries showing significantly differing CPI values under the same formulation - as we very evidently do at the moment - then you have a clear idea of who is genuinely overheating and who is falling back. Incidentally, France isn't a tax cake-walk as you must know (I live there half the year). Council tax is replaced by two significant others Taxe d'Habitation, and Taxe Foncière and they're not to be sneezed at thought I grant you it's cheaper than the UK CT. I don't know how tax should be incorporated into a CPI but it obviously needs to be looked at.
"curiosity" wrote
The problem is that if in country A mortgage interest and council tax form
40% of the average household's outgoings, because most people seek to buy, while in country B rent and other property taxes form 30%, because most people rent, then it's not smart for country A to use country B's inflation measure to make decisions about inflation. That, however, is what the boE is now explicitly tasked with doing.
I think that may have varied with region - I bought a flat in early 1994 which had almost doubled by 1997 (in London).
KotF
But note that I was focusing purely on the corruption of statistics and explaining why I believe the CPI is less likely to suffer in that respect.
Before addressing whether or not a European-wide index can satisfactorily serve ANY purpose whatsoever, or whether that purpose is better served by a local index, can you tell me what is the function of a retail or consumer price index?
In message , curiosity writes
And presumably in a rising market this same buyer will keep increasing their offer will they?!
In message , John Redman writes
He has also forced investors into property investment (reducing the tax advantages of pensions, peps into isas with reduced limits and reduced tax advantages) Then he is pushing it further with these residential property investment trust thingies that are coming.
In message , Kenny of the Fells writes
He sets their target to follow a made up inflation index.
All inflation indexes are made up.
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