Jump to content

Interest rates and unemployment - U Turn


CliveH

Recommended Posts

I am still ready the "pinks"!

 

Carney signals end to forward guidance from Bank

24 Jan 2014 | 07:58

 

I

nvestment Week

Categories: Economics / Markets Topics: Mpc | Bank of england | Interest rate

 

The Governor of the Bank of England has indicated his policy of linking interest rates to unemployment could be scrapped less than six months after its creation.

 

One of Carney's first moves when taking over the hot seat at the Bank was to introduce an unemployment threshold to give a signal as to when interest rates might start to rise.

 

This forward guidance was welcomed at the time, but yesterday Carney moved in the opposite direction after the sharp drop in the unemployment rate helped build expectations an interest raterise could come much faster - and even be seen this year.

 

Figures out this week showed unemployment has fallen to 7.1%, only fractionally above the 7% threshold which Carney had previously said was the point at which rates may start to rise.

 

Speaking yesterday at the World Economic Forum in Davos, Carney indicated the bank has decided not to revise its 7% unemployment threshold, but in a major U-turn he added the Bank is against "unnecessarily focusing on one indicator" in future.

 

"There are a broad range of things we could do," he said, while making it clear the rate-setting Monetary Policy Committee has not taken a final decision yet.

 

"We are trying to get across that it's all about overall conditions in the labour market?.?.?. We would not want to detract from that focus by unnecessarily focusing on one indicator."

 

Carney added there are no immediate plans to raise rates despite the fact unemployment has moved so close to the threshold of 7% much more quickly than anticipated.

 

......................................

 

Seems like the "rules" are made to be broken when it comes to Banks of any level :-S

 

 

 

 

Link to comment
Share on other sites

The economy is a fluid and unpredictable force with so many influencing factors that are outside of anyone's control no matter how important their figurehead role may seem to be.

 

If the leaders and policy makers failed to adjust their stance in the light of unfolding development they would be accused of negligence and pig headedness - and yet as soon as a previously stated policy which seemed right at the time to help with stability and growth is modified or scrapped they are accused of making U turns.

 

Damned if they do and damned if they don't, it seems?

 

Personally I would rather see the active adjustments needed to keep this country's manufacturing and export growth growing than a return to the bad old days of depending on service industries.

 

Why do you think countries like the Arab States and the China are buying so much overseas property and business interests? Simples - because they can afford to - because they have the money earned from us buying their exports and thus contributing massively to our own downfall. Now that is real irony!

 

Just a personal view of course and I welcome alternative theories?

Link to comment
Share on other sites

Very true tracker - but I do think it funny that Carney came in with this big idea that had worked in Canada re linking interest rates to unemployment and set the level at 7% - which at the time most went "Yeah Right!!! - and when is THAT going to happen!

 

And I am sure his thinking was much the same.

 

But now that unemployment is within a whisker of the stated level - and note - this level was set just months ago! - we now see a change of view - or as most are calling it - a U-turn.

 

But the fall in unemployment is VERY welcome - the BBC this morning showed a Brick Factory coming out of mothballs and back working again - 28 jobs lost in 2010 are now regained.

 

Good news indeed - but deposit based savers are still getting a poor deal.

 

Equity and property investors are doing very well indeed tho' :-D

 

 

 

Link to comment
Share on other sites

CliveH - 2014-01-24 12:40 PM

 

Very true tracker - but I do think it funny that Carney came in with this big idea that had worked in Canada re linking interest rates to unemployment and set the level at 7% - which at the time most went "Yeah Right!!! - and when is THAT going to happen!

 

 

He had to start somewhere and flexibility to react to an unfolding economy is in my humble view much wiser than not reacting.

 

Had successive governments reacted to the unfolding banking abuses following deregulation I doubt we as a nation would have been in the black hole in which we found ourselves in 2010.

 

I appreciate the lower paid are struggling to make ends meet but at least now many of them have proper jobs not government manufactured and subsidised false jobs and I venture to suggest that with all the help and benefits still available the low paid are a darned sight better off than were those of the post war era of true austerity that almost succeeded in putting the Great back into Britain - before successive governments wasted all that sacrifice and then frittered away our North Sea Oil for short term comfort?

 

 

Link to comment
Share on other sites

Peter James ...... I agree I bet the figures are "moulded" to fit : You'll be taken off the unemployed list even if you have a 12 hour contract ....... The government are having a laugh there's not many 40hour contracts nowadays (which would be a living wage for an adult) there all short hours especially in retail if you have a 40 hour contract then you are very lucky! So for every person who would have done 40 hours they have 3 doing 12 so that's 3 people off the unemployment figures instead of 1 ....very crafty eh?pp
Link to comment
Share on other sites

 

It's easy to get carried away in these discussions about our economy and all it's woes, and I'm sure we all know who's to blame. It seems to me that we sometimes get confused into thinking that we have just one big problem, but that's not so. We have two completely separate problems which just happen to have a couple of things in common. Those two things in common are money and the last labour government. The separate problems are the banking industry and the economy.

The banks created false representations of finance in all it's many ways in order to justify paying huge amounts of money to themselves and the friends, encouraged and supported by the Labour government, and it all seemed to work until something went wrong and it was discovered that there wasn't enough money to sort it out. The consequence was that suddenly no one was prepared to lend money to anyone and that caused the World markets to go into decline, some more than others.

The UK economy went wrong because the Labour government made a series of decisions that7 meant that it was spending more money on all it's good ideas than it could raise in taxes or borrow. It could not go on for ever, but before they had acknowledged their problem the bank thing kicked off and they have tried to pretend that that it was the banking crisis that caused their problem.

Mr Carney's problem is that he has to try to work out the solutions to both of these problems in the full sight of a largely hostile media, who generally talk like socialists, live like capitalists, and don't really care much one way or another as long as they get something printed or broadcast. Even better if they can get on telly.

Our problem is that we have very little opportunity to sort the wheat from the chaff, because none of the people involved have any real interest in helping us understand these things, and heaven forbid that we should ever be allowed to influence their decisions.

AGD

Link to comment
Share on other sites

Guest Peter James
Archiesgrandad - 2014-01-25 1:33 PM

 

 

We have two completely separate problems which just happen to have a couple of things in common. Those two things in common are money and the last labour government.

 

and what was the Tory opposition saying during the last New Labour Government?

How much has the National Debt increased since Gordon Brown left?

 

Link to comment
Share on other sites

It has only increased Peter because the cupboard was totally bare after the debacle of B'liar and Gormless Brown had done their worst. I dread to think where we would be now if it had continued after the last election.

 

http://www.theguardian.com/politics/2010/may/17/liam-byrne-note-successor

 

That note just about sums it up.

 

With the economy set to be one of the best performing in the EU this year and unemployment falling - it has taken a while but the disaster that was Labours ineptitude and overspending is slowly being expunged.

 

 

 

 

 

 

Link to comment
Share on other sites

Just as your lovely Mr Balls has been unable to prevent the present government from taking steps to mend the economy, neither was the Tory opposition able to prevent your wonderful friends from spending money they didn't have, or letting the banks run out of control.

If you sit quietly and think things through the picture often becomes clearer

My wife, CG, has antecedents in Scotland and from what I can make out the Clan motto is :-

"DON'T CONFUSE ME WITH FACTS, MY MIND IS MADE UP!"

are you from the same clan?

AGD

Link to comment
Share on other sites

Guest Peter James

Well I thought the way Thatcher squandered our North Sea Oil money had exploded the myth that the Tories are any more responsible with our money than New Labour, but apparently not.

It is said that oppositions don't win elections, governments lose them. So I think all Milliband needs to do to win the election is to keep his mouth shut and let the Tories sink themselves. As Sir Humphrey Appleby said, 'its better to keep your mouth shut and let people think you are stupid than to open your mouth and prove it'

 

Link to comment
Share on other sites

Certainly we have not spent the revenue from North Sea oil as well as we could - but this has been done by all governments - not just Thatchers. Once again the Left spin reality to make up the history that suits them rather than what actually happened.

 

But - this is all the more reason why, now that we are sitting on huge reserves of Shale gas that revenue from this energy source be used more wisely.

 

 

Link to comment
Share on other sites

Good question

 

I have always thought it is because some people assume you can buy intelligence and expertise.

 

Whilst he came to the UK with some good credentials certainly - as set out in this FT article:-

 

http://www.ft.com/cms/s/0/e5dd3922-e3c8-11e2-91a3-00144feabdc0.html#axzz2rc5GFdH1

 

His notion of "Forward Guidance" was dubious to say the least - and now that he has back-tracked on it after just a few short months, it would seem that he is yet to get to grips with the job.

Link to comment
Share on other sites

Guest Peter James
CliveH - 2014-01-27 9:52 AM

 

But - this is all the more reason why, now that we are sitting on huge reserves of Shale gas that revenue from this energy source be used more wisely.

 

 

What revenues?

Between them the nimbys and lawyers fabricating subsidence claims will take all the revenue if the frackers ever get started.

Link to comment
Share on other sites

Guest Peter James
nasher - 2014-01-27 2:34 PM

 

So why do the Government need to employ Carney on a salary of 1million a year?

 

Because he stoked up the mother of all house price bubbles in Canada and Osborne wants him to do the same thing here.

So Carney takes £3k a week housing allowance and says he will keep house prices affordable.

Never mind that industry can't compete with other countries where property prices are lower.

Osborne's core voter is a selfish Nimby obsessed with his house price.

Link to comment
Share on other sites

Peter James - 2014-01-27 3:54 PM

 

CliveH - 2014-01-27 9:52 AM

 

But - this is all the more reason why, now that we are sitting on huge reserves of Shale gas that revenue from this energy source be used more wisely.

 

 

What revenues?

Between them the nimbys and lawyers fabricating subsidence claims will take all the revenue if the frackers ever get started.

 

You really are a "glass half empty" kinda guy - arn't you Peter! *-)

 

Based on the experience just over the border from us in Dorset - Fracking is a good thing for the economy both national and local.

 

http://www.telegraph.co.uk/earth/earthnews/10233955/The-town-where-fracking-is-already-happening.html

 

What is fun is visiting Kimmeridge and grabbing a few rocks and lighting them! Here the Oil and gas bearing Shale is on the surface!

 

http://www.southampton.ac.uk/~imw/Kimmeridge-Oil-Shale.htm

 

 

Link to comment
Share on other sites

Guest Had Enough
CliveH - 2014-01-27 5:10 PM

 

You really are a "glass half empty" kinda guy - arn't you Peter! *-)

 

 

Regretfully Clive we must again disagree. He isn't a 'glass half empty' person at all. He's more of a 'totally drained but still slightly damp glass' person.

 

 

Link to comment
Share on other sites

Guest Had Enough
CliveH - 2014-01-27 5:32 PM

 

Well unlike your Frank - I see good in ALL people until i am proved wrong.

 

Which thankfully with normal people is not often.

 

It does happen tho' - as you can no doubt confer from your personal perspective.

 

 

 

Bloody hell, it's taking you a long time to see Peter James for what he really is then.

 

By the way, you said he was a glass half full person and I simply said that he's a bit more than that! Not much difference really but yours is acceptable and mine isn't?

 

Link to comment
Share on other sites

Peter and I will never agree. I think that is obvious - but neither he nor I have seen fit to make personal attacks on the other or made ridiculous Ad Homs attacks re each others home, car they drive or chosen profession.

 

Other lesser people do that and by so doing underline their personality type.

 

 

 

 

Link to comment
Share on other sites

Guest Had Enough
CliveH - 2014-01-27 6:57 PM

 

Peter and I will never agree. I think that is obvious - but neither he nor I have seen fit to make personal attacks on the other or made ridiculous Ad Homs attacks re each others home, car they drive or chosen profession.

 

Other lesser people do that and by so doing underline their personality type.

 

 

 

 

Once more you insult me and seem determined to have another argument. You accused him of being a 'glass half empty person'. I agreed with you but added that he's a bit more than just a half-glass-empty person! I really can't see any difference!

 

Oh and by the way, you need to go back and look at some of the spats you've had with him and see some of your comments!

 

I've had it Clive. You seem intent on having another huge row but I'm not. I've no doubt that you'll once more want the last word and I've no doubt that it will be in similarly insulting vein but I've had enough of you.

 

Ps It took me two minutes to find this which was in the Margaret Thatcher thread!

 

'Peter - as I have said before - you need to broaden your reading - if you only read "militant" pamphlets and word wooze - you will keep stating the bollox that you do.

 

Ignorance and arrogance are often found together - you are a classic example. '

 

You're a bit of a hypocrite Clive! I think most people would deem that a personal attack!

 

Link to comment
Share on other sites

Peter James - 2014-01-27 4:02 PM

 

nasher - 2014-01-27 2:34 PM

 

So why do the Government need to employ Carney on a salary of 1million a year?

 

Because he stoked up the mother of all house price bubbles in Canada and Osborne wants him to do the same thing here.

So Carney takes £3k a week housing allowance and says he will keep house prices affordable.

Never mind that industry can't compete with other countries where property prices are lower.

Osborne's core voter is a selfish Nimby obsessed with his house price.

 

I doubt that that is true Peter - but I do agree that what is happening in Canada is worrying given what happened in the US - is Canada going to be subject to a housing bubble burst years after every other country suffered their housing bubble burst?

 

Or is something different going on?

 

I do not know the answer - and whilst I have my doubts about Carneys credentials - I doubt that whatever has happened in Canada can be down to him and him alone

 

http://www.acting-man.com/?p=28004

 

 

Link to comment
Share on other sites

Archived

This topic is now archived and is closed to further replies.

×
×
  • Create New...