[OPE] The summit of economic analysis...

From: Jurriaan Bendien (adsl675281@telfort.nl)
Date: Thu May 01 2008 - 19:37:55 EDT

"We are probably in the grip of world forces that are greater than most people realize. Forecasting is thus very difficult at such times."

- Prof. David Blanchflower, a member of the Bank of England's Monetary Policy Committee, at a speech on Tuesday in Edinburgh.

His web page: http://www.dartmouth.edu/~blnchflr/
About the MPC: http://www.bankofengland.co.uk/monetarypolicy/overview.htm
Larry Eliott's comment: http://www.guardian.co.uk/business/2008/apr/30/useconomy.interestrates

The Scotsman reported also:

"[Blanchflower] said he had simply not seen evidence of domestically driven medium-term inflationary pressures, particularly in the labour market. If he had seen those pressures, especially on wages he would have voted for increases in interest rates." http://news.scotsman.com/latestnews/-Recession-threat-39Contagion39-is.4032746.jp

In his sharp book "The End of Finance; Capital market inflation, financial derivatives and pension fund capitalism", Jan Toporowski comments:

"...the high interest rates from 1989 to 1992, which brought about the end of the 1980s boom in the UK, had only a marginal effect on companies' expenditures. Their principal anti-inflationary effect was through the reduced expenditure of households which had entered into very large variable-rate mortgage commitments during the 1980s property boom, and small and medium-sized companies financing themselves with debt. Thus capital market inflation reduced anti-inflationary monetary policy to squeezing the expenditure of households and smaller companies" (p. 56).

For time-series graphs of UK interest rates, see for example:

Where that leaves Hillel Ticktin's "Keynesian revival" theory, I don't really know. What we ought to be looking at, is the real sources of inflationary pressures.


Factoid - in the USA, the BLS say that among the very fastest growing paid occupations is the domestic servant class of "personal and home care aides" and "home health aides", projected to rise from 1.5 million now to 2.3 million in the next ten years. In the UK, there are about 2 million domestic servants nowadays, approximately one for every 13 British households. 

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