Comments on: Interest rates and the financial crisis: Why did the Bank of England get it wrong? http://touchstoneblog.org.uk/2008/10/interest-rates-and-the-financial-crisis-why-did-the-bank-of-england-get-it-wrong/ Policy news and comment from the Trades Union Congress (TUC) Wed, 23 May 2012 15:08:19 +0000 hourly 1 By: sm http://touchstoneblog.org.uk/2008/10/interest-rates-and-the-financial-crisis-why-did-the-bank-of-england-get-it-wrong/comment-page-1/#comment-231 sm Tue, 04 Nov 2008 12:13:35 +0000 http://www.touchstoneblog.org.uk/?p=921#comment-231 Gordon Brown may have set the MPC targets so that interest rates were calibrated to undershoot inadvertently or for political reasons. The CPI statistic seems particularly as not fit for purpose. RPI would have been better in the sense it would have pricked the bubble earlier.However both were artificially depressed by Globalisation as Money Growth grew. This would have been known at the time. The MPC was prevented by its remit set by GB to target & moderate the 'Money Supply Growth' i.e. Public and Private Sector bubble money/debt. This would have constrained Economic activity and Growth, but it may have prevented the worst of the speculative excess. e.g. 125% loans, Buy to Let boom, Puposefully high financial risk leverage business models. Hence 'Words were probably the only means of moderation open to the MPC'. My suggestion would be to constrain the 'Politicians urge for the short term needs over the longer term generational needs. eg Borrowing is taxation deferred and that is a moral as well as economic issue. Fair taxation is another.' Gordon Brown may have set the MPC targets so that interest rates were calibrated to undershoot inadvertently or for political reasons.

The CPI statistic seems particularly as not fit for purpose. RPI would have been better in the sense it would have pricked the bubble earlier.However both were artificially depressed by Globalisation as Money Growth grew. This would have been known at the time.

The MPC was prevented by its remit set by GB to target & moderate the ‘Money Supply Growth’ i.e. Public and Private Sector bubble money/debt.

This would have constrained Economic activity and Growth, but it may have prevented the worst of the speculative excess. e.g. 125% loans, Buy to Let boom,
Puposefully high financial risk leverage business models.

Hence ‘Words were probably the only means of moderation open to the MPC’.

My suggestion would be to constrain the ‘Politicians urge for the short term needs over the longer term generational needs.

eg Borrowing is taxation deferred and that is a moral as well as economic issue. Fair taxation is another.’

]]> By: My del.icio.us bookmarks for November 3rd | called2account http://touchstoneblog.org.uk/2008/10/interest-rates-and-the-financial-crisis-why-did-the-bank-of-england-get-it-wrong/comment-page-1/#comment-230 My del.icio.us bookmarks for November 3rd | called2account Tue, 04 Nov 2008 07:34:24 +0000 http://www.touchstoneblog.org.uk/?p=921#comment-230 [...] Interest rates and the financial crisis: Why did the Bank of England get it wrong? | ToUChstone blog... - More arguments for reform of the MPC and the need for a 2% cut in bank rate [...] [...] Interest rates and the financial crisis: Why did the Bank of England get it wrong? | ToUChstone blog… – More arguments for reform of the MPC and the need for a 2% cut in bank rate [...]

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