Comments on: The Bank of England’s warning http://www.johnredwoodsdiary.com/2007/11/30/the-bank-of-englands-warning/ Conservative Party Member of Parliament for Wokingham Sat, 05 Jul 2008 19:15:34 +0000 http://wordpress.org/?v=2.5.1 By: paul hill http://www.johnredwoodsdiary.com/2007/11/30/the-bank-of-englands-warning/#comment-16198 paul hill Wed, 02 Jan 2008 01:42:15 +0000 http://www.johnredwoodsdiary.com/2007/11/30/the-bank-of-englands-warning/#comment-16198 Very much agree with Colin Hart.The current Treasury inflation measure is deliberately designed to reduce the headline inflation rate and not " frighten the horses". Whilst it is reasonable to point out that through outsourcing manufacturing to Asia and (until now) low commodity prices we have kept this measure at low levels there has been a huge rise in asset prices fuelled by very cheap money.This is particularly clear in the housing and other asset markets. Simultaneously disturbing and interesting that someone I had perceived as an extremely "dehydrated" monetarist makes this judgement at this time. My sense of the rather conflicting readings on the economic instrument panel is that there is an increasing risk of stagflation and that Eddie George is beginning to signal this to the Teasury Anyway this remains an ocean of calm and courtesy amidst the hurly burly of the Blogosphere-so much a more pleasant place to watch the Governments extraordinary self combustion Very much agree with Colin Hart.The current Treasury inflation measure is deliberately designed to reduce the headline inflation rate and not ” frighten the horses”.

Whilst it is reasonable to point out that through outsourcing manufacturing to Asia and (until now) low commodity prices we have kept this measure at low levels there has been a huge rise in asset prices fuelled by very cheap money.This is particularly clear in the housing and other asset markets.

Simultaneously disturbing and interesting that someone I had perceived as an extremely “dehydrated” monetarist makes this judgement at this time.

My sense of the rather conflicting readings on the economic instrument panel is that there is an increasing risk of stagflation and that Eddie George is beginning to signal this to the Teasury

Anyway this remains an ocean of calm and courtesy amidst the hurly burly of the Blogosphere-so much a more pleasant place to watch the Governments extraordinary self combustion

]]> By: Colin Hart http://www.johnredwoodsdiary.com/2007/11/30/the-bank-of-englands-warning/#comment-13680 Colin Hart Fri, 30 Nov 2007 10:51:08 +0000 http://www.johnredwoodsdiary.com/2007/11/30/the-bank-of-englands-warning/#comment-13680 Curious no one nowadays ever talks about how the money supply is out of control. It has been for some time. The difference between now and then (the 70s) is that it is the banks that have been printing money, or at least lending irresponsibly, rather than government. The result has been too much funny money chasing what are perceived to be too few goods - housing. The supply of funny money has now run out. The system needs to be drained of excess liquidity. The market is doing just that. The best thing for government and central banks to do is stand back and let it happen. It will hurt but sometimes there is no other way for us all to learn. Reply: The easy money years created comparatively little inflation because a) there was a big expansion of world capacity through the rise of India and China and b) a big increase in productivity thnaks to the digital revolution. The tight money period is now too tight and will cause more harm than is needed to control inflaiton, looking out a year or so. Curious no one nowadays ever talks about how the money supply is out of control. It has been for some time. The difference between now and then (the 70s) is that it is the banks that have been printing money, or at least lending irresponsibly, rather than government. The result has been too much funny money chasing what are perceived to be too few goods - housing. The supply of funny money has now run out. The system needs to be drained of excess liquidity. The market is doing just that. The best thing for government and central banks to do is stand back and let it happen. It will hurt but sometimes there is no other way for us all to learn.

Reply: The easy money years created comparatively little inflation because a) there was a big expansion of world capacity through the rise of India and China and b) a big increase in productivity thnaks to the digital revolution. The tight money period is now too tight and will cause more harm than is needed to control inflaiton, looking out a year or so.

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