Mindful Money’s news round-up: Monday 18th July 2011

18th July 2011


Story of the day:

Stock markets fell on Monday as a healthcheck on banks failed to stem worries about Europe's debt crisis. – BBC

Stock markets fall on fears over Europe's debt crisis

 

And the best of the rest

 

Parliament may sit for an emergency session on Wednesday to discuss the growing phone-hacking scandal, Prime Minister David Cameron said on Monday. – Reuters

Cameron says parliament plans emergency session

 

The hacking scandal should not overshadow growing concern over market turbulence. – The Telegraph

Let's not bury bad economic news by focusing on Murdoch  

 

Crunch week for euro begins with market reaction to European bank stress tests – The Guardian

Eurozone default could trigger Lehmans-style crisis, says Trichet

 

Targeted VAT cuts are needed to boost growth in key sectors of the economy, the Federation of Small Businesses (FSB) has said. – BBC

FSB calls for targeted VAT cuts to boost UK economy

 

No one has a crystal ball, not even investment advisers. – NY Times

4 Questions to Ask Your Investment Counselor  

 

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13 thoughts on “Mindful Money’s news round-up: Monday 18th July 2011”

  1. Drf says:

    Shaun, when you have inveterate liars and thieves in control of the BoE it is pointless writing letters to them exposing their failures.  They do not want to pay any attention, and are intent to continue with their ongoing deceit! (It is similar with government and Quango consultations.) They play the game of supposedly responding, but their responses deliberately parry the real issues and the truth. They follow the ways of their master, and their eternal destiny will be the same as his.

  2. Drf says:

    Meanwhile after all the claims that weak Sterling would enable a flood of exports, we see now again this morning that the balance of payments deficit is still widening, because exports have fallen again. This as with all the other REAL economic parameters shows that the complete policy is based on lies and intentional theft from the poor and middle classes; in fact just the same as their mates – the Banksters, whom most of these disastrous policies have been implemented to support.

    1. Anonymous says:

      Hi Drf

      Yes what did happen to the rebalancing of the economy that we were promised from the devaluation?

      I think you will like this which I was going to put into today’s article but with the scanner debacle run out of time to do. I saw it on HPC posted by OnlyMe and it showed that the UK’s trade balance had steadily deteriorated since the introduction of the MPC in 1997 to 2008 when that chart ended.

      I do not seem able to put it on here so I will add it to tomorrow’s article.

  3. Anonymous says:

    Hi Shaun

    I thought I would compare Mr Hoban’s reply to Mr Osborne’s remit letter of 23 March 2011. Price stability is the legal task of the BoE defined by the 2% target ” at all times”. If CPI diverges from target by 1% either way due to “shocks” and “disturbances” and if raising/lowering interest rates / QE may increase volatility in output the qualification says that explanations must be provided with policy measures to bring it back to target. Osborne is always free to revise the target at the time of the Budget.

    Not sure how this fits with Mr Hoban’s letter. It looks as if the target is now defined by it’s qualification as opposed by the ” 2% at all times” bit.

    1. Anonymous says:

      Hi Shire

      Thank you for the comparison. As I put in the article I was concentrating more on the Bank of England’s website which I am sure has changed over time from inflation to projected inflation.

      That caught my attention as of course throughout the episode of elevated inflation the MPC has forecast or projected inflation on or even less accurately below target.

      But with your point and mine I think we can be sure that there is a drip drip weakening of the target. Personally I put it down to presentation as missing it in reality does not seem to have bothered those in charge much if at all.

  4. Anonymous says:

    It is good I think that you continue to make this case. The government and the Bank of England seem to be in cahoots with each other and it is not as if their policies are doing well is it?

  5. ChrisLongs says:

    Shaun,
    Perhaps you should write to Ed as Labour appear bereft of new ideas. Why have a dog and bark yourself?

    1. Anonymous says:

      Hi Chris

      Why not indeed? I have to confess that I had not thought of that and it is certainly worth a try. Thank you.

    2. Anonymous says:

      labour could try to emulate the Canadian Liberals & NZ Labour party.

      Honestly running a balanced budget is cheaper in the long run. It saves money by reducing the interest bill paid to bankers. Real social democrats should try to pay teachers more than they pay interest to bankers.

  6. Loafalot says:

    I support your campaign to have members of the BoE face election / re-election. Frankly the central banks globally are stuffed full of doves … independent my arse.

    To repeat the point I raised a couple of weeks ago: I think the BoE are buying up (nearly all!?) the gilts because it’s ultimately the only way to raise interest rates from the zero bound without bankrupting the banks. When IR’s eventually rise, gilt prices will fall sharply, and the BoE (i.e. UK taxpayer) will take the hit, rather than the banks who will be awash with printed cash. That’s what all this QE is about IMO. Could someone please ask Mervyn King whether I’m right?!?

  7. Davidmicheal Lilley says:

    Shaun,

    I have recently been introduced to your site via your hyperlink on a BBC comment.

    I shall continue to read your blog as you introduce lots of numbers and the results of your research and I like this attention to detail. But I sometimes must disagree and this is one such occasion.

    I always follow Mervin King’s speeches and responses to the Select Committee and I always see a professional giving excellent comment on his sphere of influence.

    Many comment that the MPC has not met its 2% inflation target for some two years but I think their remit is a little larger than “2% at all costs”.

    I considered Ben Bennanke’s coming to office and taking the US base rate from 1 to 3.5% in straight sets and Mervin taking ours from 3.5 to 5.5% in straight sets to be a coordinated attack on their respective house price bubbles. They prevented further house price inflation but the bubbles were already too large and we witnessed the consequencies of the US housing bubble bursting and both Ben and Mervin had to quickly bring down interest rates to near zero to avoid a depression. They then had to intoduce QE as it was the only way to stimulate their economies once the interest rate cutting tool had been exhausted.

    US QE1 and 2 and our £200b of QE1 and £75b of QE2 have not led to inflation. They have very low inflation and ours has been due to the VAT rise and higher import costs due to our market devaluation of 25% some two years ago. Oil and commodity price rises were unpredictable.

    As Mervin is forced to point out again and again and yet again he cannot predict the future but only make a judgement as expressed in his fan charts.

    But we all know that now is not the time for interest rate rises and Ben Bennanke has gone as far as stating that they will not rise in three years. We have stimulated and stimulated to kick-start our economies but it has not led to a turnaround. Debt and deficit prevent further stimulus and QE3 is therefore on the cards here and not a rise in interest rates in the face of temporary inflation.

    The ECB wrongfooted when it raised its base rate last year but this has now been corrected. New leadership at the ECB has quickly reduced their interest rate by 33.3% to 1% and they have now introduced backdoor QE to the tune of 0.5t Euro.

    We are on the right track to do what is absolutely necessary, prevent a second great contraction, a second Great Depression. But we could go further if we introduced G20 pro-rata QE and let countries that aren’t “too big to fail” to fail.

    1. Anonymous says:

      Hi David and welcome to my part of the blogosphere.

      There is no compulsion to agree on here! Indeed a debate is welcomed and the comments section  with its regular frequent civilised and well-informed debates is a clear strength of this blog.

      As to my views on QE there is a section on here which covers them from the early days. However if you wish to read the comments on ones before March 2010 then you need to check them on my Notayesmanseconomics blog as only the articles were transferred onto here.

      In the end there is invariably something to agree on.

      “As Mervin is forced to point out again and again and yet again he cannot predict the future”

      Amen to that! I will agree with you and Mervyn on that one…

    2. John mccusker says:

      “But we all know that now is not the time for interest rate rises” Well, speaking as one of the “all”, I don’t know that. In my opinion interest rates should be increased to the point at which money and assets are properly priced. There would, of course, be adverse consequences for those who borrowed too much. However the zero interest regime has very adverse consequences for those who did not borrow too much. How about moral hazard? All policy currently is aimed at rewarding the feckless at the expense of the prudent. Apparently this is to continue for years, yet this policy is clearly not working. Better get it over with now, get money and assets properly priced, let the bankrupts fail (including most banks) and start all over again. Painful for some, no doubt, but the current situation is painful for many. Somebody has to pay the price for some disastrous misjudgements- how about it being those who made the misjudgements? 

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