By how much should the Bank of England increase interest rates in a traditional monetarist economy

[ks.234]

Star Trek teaches us many important lessons. Swear Trek too.

You should give conscientious objecting a try.
But now I'm falling into the same trap as team MMT - making a positional sales pitch - it really is that easy!

You appear to be trying to derail a thread about Monetarism

 

[klfrs]

You appear to be trying to derail a thread about Monetarism

You appear to have forgotten the topic.

 

[ks.234]

You appear to have forgotten the topic.

Not me.

 

[klfrs]

Not me.

The topic is how much should BoE increase interest rates, and not "Monetarism".

You appear to be trying to derail a thread about Monetarism

 

[ks.234]

The topic is how much should BoE increase interest rates, and not "Monetarism".

Try actually reading the title

 

[klfrs]

Try actually reading the title

Try reading the whole title.

 

[Snufkin]

Get more people to read Galbraith!

I would add Malthus to that. Its many years since I read his work but some of it has stuck with me. He expounds on how we (humans) have a tendency to use all our surpluses and repeatedly fail to prepare for lean times. Malthus wrote about much more than overpopulation and is somewhat overlooked now.

 

[Snufkin]

As for interest rates, at least 10% to damp down excessive borrowing and asset inflation.

 

[Ponty]

As for interest rates, at least 10% to damp down excessive borrowing and asset inflation.

Crikey, that would well and truly flush out the system! Having said that, IIRC we haven’t had a period of high inflation when IR’s haven’t had to match the inflation rate to bring it back under control. It’s different this time, I hear them shout..

 

[ks.234]

Crikey, that would well and truly flush out the system! Having said that, IIRC we haven’t had a period of high inflation when IR’s haven’t had to match the inflation rate to bring it back under control. It’s different this time, I hear them shout..

If 10% will work, won’t 20% work quicker?

 

[Snufkin]

If 10% will work, won’t 20% work quicker?

1-3% does very little; 10-12% might cure if we are lucky; 20% would probably kill.

 

[ks.234]

1-3% does very little; 10-12% might cure if we are lucky; 20% would probably kill.

If 12% will cure, why will 20% kill? If 12% will stimulate long term growth why won’t 20% stimulate growth quicker?

 

[Ponty]

If 12% will cure, why will 20% kill? If 12% will stimulate long term growth why won’t 20% stimulate growth quicker?

That’s like me saying if the govt can print unlimited currency, why give people £400 towards their energy bill, just give everyone £1M.

Anything under 5% base rate will historically still be very cheap money. The question is, will cheap money cure a high inflation problem? Hmm…

 

[Sue Pertwee-Tyr]

You should give conscientious objecting a try.
But now I'm falling into the same trap as team MMT - making a positional sales pitch - it really is that easy!

So no, then. I’ll bear that in mind when reading your posts from now on.

 

[Snufkin]

If 12% will cure, why will 20% kill? If 12% will stimulate long term growth why won’t 20% stimulate growth quicker?

I did say might cure and do we really want more growth?

 

[klfrs]

So no, then. I’ll bear that in mind when reading your posts from now on.

Please ignore me. Reading what you can't comprehend, and then tut-tutting about it is a waste of everyones time.

 

[matthewr]

But the only actual economist that I'm aware of on pfm is matthewr, and he has been consistently critical of monetarism for as long as I can remember.

Just for clarity, I am not an economist and have never studied economics. I worked for 20 years in the City as a computer programmer mostly interest rate and bond trading systems which is where most of my knowledge, such as it is, comes from.

Although it should be said that generally the city is not a good place for finding out about economics for a number of reasons and most of what I did learn on the subject came from reading.

 

[stevec67]

Crikey, that would well and truly flush out the system! Having said that, IIRC we haven’t had a period of high inflation when IR’s haven’t had to match the inflation rate to bring it back under control. It’s different this time, I hear them shout..

IRs have to rise when inflation does. If they don't, people will take their money out of the bank and buy tins of beans. One of these items will be worth 10% more in a year, which one is the better investment?

 

[matthewr]

QE included BoE creating money, and with some of it purchasing uk gov debit.

The newly created money was indeed swapped for bonds (mostly government, some corporate) but it was a swap and the balance sheets of the (commercial) banks stayed the same size and just shifted in composition. The idea was to increase liquidity and therefore stimulate the economy.

It was a pretty shit idea and they should have actually printed money and given it to people (aka "helicopter money"). But mostly they were hamstrung by the government that had completely abandoned fiscal policy at the very worst possible time so they (and therefore us) were basically screwed.

 

[tonerei]

The newly created money was indeed swapped for bonds (mostly government, some corporate) but it was a swap and the balance sheets of the (commercial) banks stayed the same size and just shifted in composition. The idea was to increase liquidity and therefore stimulate the economy.

It was a pretty shit idea and they should have actually printed money and given it to people (aka "helicopter money"). But mostly they were hamstrung by the government that had completely abandoned fiscal policy at the very worst possible time so they (and therefore us) were basically screwed.

My Goldman Sachs employed brother-in-law pronounced me as bonkers when I made such a suggestion during the 2008 financial crisis. Definitely a bit of MMT was needed then. The caveat for me was if money was owed to a bank by the receiver of the cash they had to hand it over to clear down their debt. Simples and much fairer than just giving it to the mad greedy banks. BTW I aint an economist either and I am not very bright