Traders predict house prices will fall by 50% in four years

[BrilloPad]

It's the job of any sensible government to control the boom through interest rates. This one didn't, they actively encouranged it. It's ultimately going to drag us into recession.

Should they control the "doom" by lowering interest rates?

http://www.telegraph.co.uk/money/mai...09/ccom109.xml

Yet, if the problem for the Government is the MPC, could the Chancellor tinker with the personnel at the Bank? Again, he comes to this possibility late. He has already reappointed that sturdy inflation fighter, Mervyn King, as Governor - and he is not the sort to succumb to any sort of pressure.

Conceivably, the Chancellor could try to fill vacant MPC slots with people who favour a more expansionist stance. But this is unlikely to bring much joy. Anyone who could command the credibility to be appointed to the committee would be unlikely to be Mr Darling's poodle.

A more plausible idea is to alter the remit of the MPC. The target rate of inflation could be raised, or inflation could be redefined to refer to only core inflation, or domestically generated inflation. In principle, the Chancellor could even switch back to the old target variable RPIX, at the old target of 2.5pc. Because of falling house prices, RPIX is set to fall towards the CPI, and eventually below it.

But the Government's credibility would collapse - in the markets, in Parliament and, I suspect, with the electorate. One tinkering with the inflation target can just about be accepted: two would be beyond the pale.

[NoelWatson]

Should they control the "doom" by lowering interest rates?

http://www.telegraph.co.uk/money/mai...09/ccom109.xml

Yet, if the problem for the Government is the MPC, could the Chancellor tinker with the personnel at the Bank? Again, he comes to this possibility late. He has already reappointed that sturdy inflation fighter, Mervyn King, as Governor - and he is not the sort to succumb to any sort of pressure.

Conceivably, the Chancellor could try to fill vacant MPC slots with people who favour a more expansionist stance. But this is unlikely to bring much joy. Anyone who could command the credibility to be appointed to the committee would be unlikely to be Mr Darling's poodle.

A more plausible idea is to alter the remit of the MPC. The target rate of inflation could be raised, or inflation could be redefined to refer to only core inflation, or domestically generated inflation. In principle, the Chancellor could even switch back to the old target variable RPIX, at the old target of 2.5pc. Because of falling house prices, RPIX is set to fall towards the CPI, and eventually below it.

But the Government's credibility would collapse - in the markets, in Parliament and, I suspect, with the electorate. One tinkering with the inflation target can just about be accepted: two would be beyond the pale.

"Because of falling house prices, RPIX is set to fall towards the CPI, and eventually below it."


RPIX - All Items Retail Prices Index excluding Mortgage Interest Payments. Why would it be affected by house price falls? It is currently 4% so has a long way to fall

[bobhope]

surely all they need to do is alter the way inflation is measured again. At the moment the basket is weighted as such:

Ipods: 30%
DVD Players: 30%
Stuff that is going down in price : 30%
petrol: 1%
food: 1%
Stuff that is going up : 8%


If they apply some more substitution filtering on the data, they could get rid of the food and other stuff that is going up in price.

Plus ipods are getting better, so better apply some hedonic adjustments to find that inflation is really 0.01%

Can't believe they get away with calculating inflation the way they do.

[BrilloPad]

"Because of falling house prices, RPIX is set to fall towards the CPI, and eventually below it."


RPIX - All Items Retail Prices Index excluding Mortgage Interest Payments. Why would it be affected by house price falls? It is currently 4% so has a long way to fall

I dont think it is a direct effect.

At the moment all measures of inflation are predicted to head towards zero next year? But alot depends on external factors - oil and food prices.

I hope this country can grow enough to sustain itself if push came to shove.

[HairyArsedBloke]

If they apply some more substitution filtering on the data, they could get rid of the food and other stuff that is going up in price.

Plus ipods are getting better, so better apply some hedonic adjustments to find that inflation is really 0.01%

Can't believe they get away with calculating inflation the way they do.

That's core/non-core inflation for ya. Core is stuff that can do something about with interest rates and non-core is the rest.

Unfortunately, non-core is a funny ol' name because the items in it form the core of the spending of many people especially those on pensions and benefits. Those benefits are indexed each year on a measure that does not reflect the recipient’s pattern of spending. So each year they get poorer in real terms.

[Bagpuss]

Article about poverty

oops

[NoelWatson]

I dont think it is a direct effect.

At the moment all measures of inflation are predicted to head towards zero next year? But alot depends on external factors - oil and food prices.

I hope this country can grow enough to sustain itself if push came to shove.

Which measures are predicted to fall to zero? have you seen the PPI numbers and CPI projections?

[Marina]

Someone described him taking over the PM role as like having an old uncle who is working away in the garden shed for years, building something, and he won't say what it is. One day, after many years, you look through the window, and.. there's nothing there.

I'd like to think they were working towards some sort of a plan, even if it was "we're going to get gubbed, so let's fsck it up for the Tories"

That's good

Alternatively, like that famous quote from the novel Cold Comfort Farm, by Stella Gibbons, maybe there's something nasty in the woodshed.

[TheBigYinJames]

That's good
Alternatively, like that famous quote from the novel Cold Comfort Farm, by Stella Gibbons, maybe there's something nasty in the woodshed.

There is. Gordon Brown is a quick and surprising return to a heavy tax culture. Only this time he's taxing the middle and lower classes instead of the super rich.

[HairyArsedBloke]

Quite rational too. If you want to tax something you have to make sure that it remains around to continue to generate revenue. The rich are more able to leave than the poor; so it is better to target the poor than the rich.
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