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Stephanie Flanders | 17:43 UK time, Tuesday, 16 June 2009

Most countries would think long and hard before appointing a foreign citizen to a senior policy-making role. At the Bank of England, it is becoming something of a tradition.

We learned today that Adam Posen, a distinguished US macroeconomist, will replace Tim Besley on the MPC when his term expires at the end of August. By my count, Posen will be the third foreign-born economist to sit on the committee, and the second person to be appointed while resident abroad.

Bank of England

Funnily enough, Posen and I studied at Harvard together in the mid-1990s and kept in touch later when we were both working in Washington. The most important thing to know about him is he has a global perspective - more global, in fact, than his US-based predecessor, David Blanchflower.

An expert on monetary policy, Posen is a widely recognised authority on the Japanese experience since 1992, which can be no bad thing in the current climate.

His knowledge of Japan, and of the way in which a major banking crisis can hang over any economic recovery, may partly explain why he was an early and enthusiastic supporter of fiscal stimulus packages in the US and elsewhere.

It may also explain why he has warned of a W-shaped recovery in the US, and supported earlier, more comprehensive action to clean up bank balance sheets. As it happens, a tough-minded article on the state of European banks [352Kb PDF], co-authored by Posen, was published today.

He is an American, born and bred - he held great Super Bowl parties back in the day. But he has a long history of taking great interest in other countries: not only Japan but Germany and the Eurozone, which are deeply unfashionable subjects in the US.

He spent a few months at the Bank in 2006, but to my knowledge he has not shown much interest in the UK. Presumably that will change, but it is in sharp contrast with Blanchflower, who grew up in the UK and has spent much of his career, one way or another, thinking about the UK economy. The same is true of most of the rest of the MPC.

In line with the new rules, he says he will be moving to the UK to take up his post. Famously, Blanchflower did not, which many feared what make him out of touch about economic developments in the UK. Given that he was the lone voice on the committee calling for interest rate cuts long before anyone else, that complaint rings somewhat hollow today. A bit of distance from Threadneedle Street may be no bad thing for a member of the MPC.

Regardless, I suspect that Mervyn King will be pleased by the new addition. Adam Posen is a savvy academic who does not very readily suffer fools - nor I suspect, politicians. And he will need little persuading that the recovery needs to be handled with care.

Comments

  • Comment number 1.

    Stpehanie

    You clearly have a good opinion of Adam Posen and that is only fair. I have no doubt that he will do his best with his obvious skills.

    It is in my view regretable that once again it is thought highly suitable to appoint an academic to this sort of position. I appreciate that one would want to employ as broad a body of skills on the MPC as one can, but one is increasingly of the feeling that we are all part of an intellectual exercise rather than of a stuttering and stumbling economy that requires urgent attention.

    No doubt this feeling is a product of the total lack of political leadership which is apparent. There is no sense of direction but an increasingly animated, if not Gilbertian debate amongst the great and good as to whom amongst them should get the biggest slice of pudding.

    I do hope Mr. Posen will do well. Since you find him agreeable I expect we will all come to appreciate him in due course. However, this is a very strange environment at the moment so no doubt he will look forward to adding value to his CV. For my part at least, I am left asking `so what?'

  • Comment number 2.

    Great news! Posen is a hero, his analysis of Japan is where it's at. Let's just hope that we don't need it...

  • Comment number 3.

  • Comment number 4.

    Has Mr Posen's analysis on Japan been tested or is it just theory?

  • Comment number 5.

    MMG - Mervyn and his minions MUST Go.

    The whole idea of the MPC and the Governor have some from of understanding and will do the right thing in setting interest rates is proven to be wrong and what is worse it is a dangerous falsehood.

    We need a new system - not new bodies!

    The fact that the Bank 'knew' (and I have it in writing, under both Eddie George and Mervyn King) that their interest rate policy was designed to create a credit bubble as it deliberately and wantonly ignored asset price inflation means that the system must be changed.

    They got interest rate policy catastrophically wrong for at least the whole of the last decade. The also knew that they had done so at the time. They are lilly livered cowards who take the Governments shilling and pretend that they are some from of independent experts and are setting interest rates to the best of their ability and skill. (OK, they may be doing their best - but it is totally inadequate!)

    Fire the lot and start again. This time the Bank MUST take into account asset price inflation and imported deflation when setting rates - if they do not - the recession will last decades from one bubble to the bust in shorter and more violent cycles and more of the country destroyed each time. Critical to avoiding this - they must restore SOUND MONEY.

    Interest rates must value money at some reasonable positive level sufficient to restrain asset price inflation. Asset price inflation is the cause of the banking difficulties along with too low interest rates that created it. So rates up to 4 - 6 percent PDQ.

  • Comment number 6.

    I do not have the same qualms about Posen being a non-Brit as Stephanie. A global perspective and an in depth knowledge of the Japanese 'Lost Decade' could be most useful in our present situation.

    However, as I understand him to be an avowed monetrist, I do have some concerns. Perhaps Paul Krugman should be invited to balance things up?

  • Comment number 7.

    Did Adam Posen predict the problem well before it happened? I believe David Blanchflower almost did (or was at least the closest in the MPC).

    Let's ask a few more simple questions:

    1. Traditional 'economics' is dead. Does he realise this?

    2. Does he know that real 'leaders' predicted this situation over 20 years ago, and predicted a "New Economics" being born "Out of a Crisis"...

    3. Does he know who predicted this (nb- he was a 'creative outsider' and not a eminent lecturer in economics at Havard), why he said this, and what the new form of 'economics' will look like*?

    Business schools are 1-2 generations out of date (cf 21st century practices**) and it appears this is similar in Economics too. What we need to do is to ask basic questions, bring more realism to bear and adopt some effective & sustainable solutions for once (not just ones that benefit the speculators, money lenders and gentlemen's clubs).


    David Clift, a Future 500 Leader

    * NB It won't be Poweromics! NB Poweromics = People using position and power for their own personal gain, based on poor moral values, self interest and greed. More info available at http://poweromics.blogspot.com

    ** http://books.google.co.uk/books?id=-8xAIgkewOUC&printsec=frontcover


  • Comment number 8.

    Post 5 John_from_Hendon

    "The fact that the Bank 'knew' (and I have it in writing, under both Eddie George and Mervyn King) that their interest rate policy was designed to create a credit bubble as it deliberately and wantonly ignored asset price inflation means that the system must be changed"

    ===================================================================

    ... My conversation with an MPC member re the need to include house asset prices inflation properly would support this assertion too ... and hence I agree with John_from_Hendon's conclusion.

    Changing one of the 'crew' will do little to stop the ship from sinking, when the whole system was at fault and focused on the wrong targets/goals ...

    ... and if the 'leaders' knew this, but chose to do nothing about it, then removing them is arguably the least that should happen (eg. how about taking the losses out of their lucrative pension 'pots' - they would probably have acted then)!

    David Clift, a Future 500 Leader


  • Comment number 9.

    Hi Stephanie

    The BoE needs all the help it can muster.Take a look at the Bank of England Q2 Bulletin. In answer to the question as to whether QE is working there is a resoundingly confident ' dont know'! Bearing in mind we are now 86.5 billion funny money pounds (? 6.23% nominal annual GDP growth) into the programme...They say " There is considerable uncertainty about the strength and timing of the effects.Standard economic models are of limited use in these unusual circumstances and the empirical evidence is extremely limited." They appear unable to assess what sellers of gilts may or may not do with the liquidity provided. They worry about the banks stifling the effect because of their balance sheet troubles, capital pressures and long term funding issues. What they give us no angle on is whether gilts sellers reinvest QE in to new HM DMO gilt issuance. Remembering that budget forecasts have translated QE into a direct boost to nominal GDP, this is very worrying and deserving of attention.

    I hope Posen doesnt treat his post as an intellectual game - as Blanchflower reminded everyone - its peoples' lives being messed up!

  • Comment number 10.

    Stephanie says "Posen is a widely recognised authority on the Japanese experience since 1992." Well,the Japanese ain't listening to him since 1992! I do not blame them, Japan and USA are industrial rivals which makes Posen's credibility suspect.
    Posen's superiority comes from being a "bit of distance from Threadneedle Street" is just nonsense. Since, Posen's economic prognosistication is to benefit the same 'road'.
    I have had enough of mumbo-jumbo economists. Only one economist I trust: Paul Samuelson who pointed to the fallacy 'stocks are risky in the short run, they're safe in the long run'. It served me well for the my adult life of 20 years.

  • Comment number 11.

    Surely if any lesson is to be learnt from the events of the last year it is that the MPC is a waste of time and should be scrapped. It is ridiculous to imagine a modern technologically based economy management being largely conducted through the twitterings of a geeky club of money men. I am sure Mr Posen, though, is a very nice man.

  • Comment number 12.

    And exactly what's wrong with being American? We destroyed the world's financial system by how we managed our banks, I'm sure we can do the same for you.

    Liv

  • Comment number 13.

    Until the problem of interest rates influencing differentially the following UK markets -

    - Manufacturing credit cost

    - FX

    - The UK housing market

    We may as well whistle in the wind.

    It is entirely obvious that the BoE had some insight into the problems brewing but appeared transfixed on the issue of interest rates as the only tool with the entirely pathetic excuse reported that the BoE couldnt work out how to deal the housing problem and presentation of monetary policy at the same time. It is pretty obvious that the problem was not helped by the apparent political directive that housing inflation should not enter the equation.

    The issue should have been the control of access to credit for the domestic housing market via regulation of application criteria. You do not need to go to Harvard to know that. It was that dysfunction which was fatal. Putting interest rates up influences FX upwards in general and negatively affects manufacturing/business and damages exports. The appointment of Posen is a tacit acknowledgement of the fact we may be due to enjoy the japanese experience where continuing dysfunction within the economy gave mixed response to economic policies and troughed along.

    The UK housing market currently remains dysfunctional. Prices remain high against historically criteria. FTBs are inhibited from entry due to high deposit criteria and the continuing high prices and uncertainty about further possible drops. The housing market activity is almost certainly currently driven by sellers and buyers with relatively large equities mainly level trading. As such it give false signals as the issue is buffered by equity volumes. It all makes little difference if you are level trading. It is all diluted and you are not bothered about the outcome untill you are downgrading big time. Further negative equity is keeping some housing stock off the market, and that will continue for years. It all comes back to turnover, roughly 4 percent of housing stock is a boom, 2 percent is a working market, 1 percent is a stuffed market. This is not rocket science it is all well established over decades.

    The housing market and house building has been important to the UK for decades. Knocking it on the head, which is what has been achieved, with new builds collapsing is crazy. At this stage it is important that house building resumes. It provides substantial employment and spin-off expenditure.

    It is not at all clear that house prices have bottomed despite what is probably overly optomistic reporting, but when they do, probably in a yuears time, if the banks do not also reduce FTB deposit criteria, and concurrently assurance is not provided by one mechanism or another that high interest rates will not almost immediately impact on a purchase then things will not move forward. This crisis has many roots but the principle one was overly generous housing finance. Until housing finance is return to some form of working balance it is difficult to see the economy functioning at any sensible level.

    It is blindingly obvious that an adaptation of the 1930s US initative of Fannie Mae and Freddie Mac where some security on long term housing costs was offered to home buyers is now needed in the UK. This mechanism was one of the main things that helped the US out of recession. Whilst house ownership was low in the 30s the same problem is present today. It is not an issue of discounting total cost to the buyer, it is a matter of ensuring a smoothing of sharp movements in monthly due to the erratic, and often arbitary movements of interest rates. It is quite clear that interest rates are where they are, too low, it would appear, as a matter of policy. In the same way that they were previously too low to stop the housing boom. Interest rates are not accidental they are a matter of policy. If short term costs vary from long term costs then that is what is needed. The danger of flow from long term funding to short term funding is controlled by access criteria.

    House building is manufacturing. Houses almost exclusively are built in this country, they are not imported finished. There are substantial numbers of people engaged in it. Houses last longer than cars which are attracting so much political attention. They individually attract more investment than cars. The wrecking of this activity by the deadly tripartate of HMG, the FSA and the BoE, and their failures is utter madness. There will be no significant economic growth in the UK until the housing market returns to some sort of normal function, it is as simple as that. That is where the focus is required. As there is a lead time on building and people remain sat on the sidelines doing nothing and cost the taxpayer on the welfare budget, or heading off elsewhere via retraining so a shortage of skills nay reslut when things do uplift, surely it is about time a sound policy was developed in this area. Rather than the usual deafening silence from HMG, or baloney from the SFA, sorry FSA, that regulation, which is simple at the point of sale and contract criteria, is so stunningly difficult. How on earth did finance operate in the days before Brown.

    So as far as I am concerned the media and economists can debate this or that measure, this or that banking bung, this or that shape of recession or recovery. It is meaningless until the issue of the UK housing market is sorted, which will almost certainly demand initatives, initative being a word in somewhat and remarkably short supply it would seem. Why is there such focus on banking, take a look at the value of the UK housing stock it dwarfs RBS. And before somebody posts and says I am proposing another bubble I am not. Bubbles are avoided by controlling the fuel, credit, at the point of sale, at all times. A bubble is not exactly the problem at the moment is it, if you have any bubble it is a negative bubble.

    It started with housing therefore logic says it has to end with housing, and in future locking up bankers who do not follow clearly stated mortgage criteria. a house is the largest single financial investment any individual will make. Can anybody sensibly say whay this activcity is not subject to the same strenuous consumer protection that far cheaper items provide. Because it would upset big business, get real - consumer protection is supposed to upset big business. It is suppose to level the playing field. This whole saga shrieks of abuse of commercial position.

  • Comment number 14.

    #13 "The appointment of Posen is a tacit acknowledgement of the fact we may be due to enjoy the japanese experience where continuing dysfunction within the economy gave mixed response to economic policies and troughed along."

    Unfortunately, we will not !! While the Japanese could depend on their manufacturing and exporting power to see them through the tough times, Britain does not enjoy that luxury !! Where they have stagflation, we'll just have a recession/depression until we get our collective head out !!
    All this nonsense about "green shoots" is just more massaging of numbers for the soundbytes.

    I hope this new guy has a better effect since Danny Blanchflower was the lone voice crying in the wilderness. He was the Cassandra that was ignored until he was proved right, to the detriment of those who ignored him !! If getting this guy in is more shuffling of deckchairs on the Titanic, then it will be yet another exercise in futility from an ever more desperate government struggling to survive to the last !!

  • Comment number 15.

    Applying the rule of Occam's Razor, we should keep assumptions to a minimum as far as the appointment of Mr Posen to the MPC is concerned. The one thing we need not assume is the fact that the BoE's policy of QE is inflationary no matter in what kind of "fancy clothes" it is dressed up as.

  • Comment number 16.

    "Funnily enough, Posen and I studied at Harvard together in the mid-1990s..." Wow, over ten years of hands on experience. Secretary of the Treasury Paulson was supposed to have been an expert on the causes of the great depression of the 1930s. One has to wonder if that's why he so successfully contributed to engineering the current one. Is this one any better? I have to be skeptical.

    The fatal flaw in the entire "financial and business establishment" is that they are all cut from the same bolt of cloth. They have been trained to view situations and problems the same way according to the same line of thinking. They are inbred, the result of a universal view of economics that has infested all major businesses, governments, banks, investment houses with the same MBA mentality. That for example is why the physical infrastructure of major corporations is falling apart due to neglect while CEOs played games with all kinds of tricky financing schemes, mergers and takeovers, and other gambits that destroyed wealth instead of creating it. (AOL badly damaging Time Warner is a perfect example.) These are the same people who engineered the crisis and as they were doing it swore they were doing the rest of us a favor. I don't know that there are any alternatives but looking for someone with a magic bullet is pure wishful thinking. Even Warren Buffet is looking very bad these days and Alan Greenspan is totally discredited.

    You don't have to be a genius to figure out that the recovery in the US is likely to be W shaped. All you have to do is look at the last depression and recovery that started with the stock market crash beginning in 1929, realize that the same concepts of laissez faire capitalism and easy credit to buy assets which were the collateral for that credit created a highly speculative bubble market in that asset, and then look at the shape of the recovery in the 1930s to know that history seems to be repeating itself. What is most discouraging is that they ignored Santyana's warning that those who do not learn the lessons of history are condemned to repeat them. Why should anyone be optimistic that this individual has wisened up. Gordon Brown was supposed to have been a genius last fall...for about six weeks until his plan fell apart.

    There are supposedly four more ticking time bombs out there. The US bond market, credit card debt, commercial real estate in the US, and the financial crisis in Eastern Europe that will involve Europe's banks. Each of these could be of the same order of magnitude as the home mortgage and residential real estate generated financial crisis. To me the donut looks a lot smaller than the hole.

  • Comment number 17.

    #16 "There are supposedly four more ticking time bombs out there. The US bond market, credit card debt, commercial real estate in the US, and the financial crisis in Eastern Europe that will involve Europe's banks."

    Of the four you mentioned, one (the US bond market) is being partially addressed by the SCO/BRIC meeting in Yekaterinburg.

    http://news.bbc.co.uk/1/hi/business/8102467.stm

    Three of the four BRIC countries want a new reserve currency. However, they are *NOT* willing to panic the market into a mad headlong rush into selling right now. They will slowly release as much of their US Debt holdings as possible into the market while buying as little as possible. This will lower their exposure and force the USD down, which, in turn, will lower the number of choices that the US has for any future action.

    In order to preserve the strength of the USD for political and/or financial reasons, the US government will *HAVE* to rein in their spendings and/or allow the sale of choice assets to the BRIC countries !! Red neck politicians will no longer be able to torpedo done deals in Congress or the Senate.

    The first crack in the US facade has already appeared !! When the US pressed China about CO2 reduction, the Chinese offered to do so immediately *WHEN* the US achieve parity with the Chinese on a per capita pollution basis !! This effectively means that the US has to reduce theirs by 75% *BEFORE* the Chinese start to reduce theirs !! Hence the current US "face-saving" statement that they will not "press the Chinese too hard" on the environmental aspect !! Something there about pots and kettles, I believe, since any drastic reduction of US pollution levels will damage or destroy any US recovery for the next two/three decades (a whole generation) !!

    "Gordon Brown was supposed to have been a genius last fall...for about six weeks until his plan fell apart."

    He was also supposed to have saved the world just as the Third Reich was supposed to last for a thousand years !!

    "Even Warren Buffet is looking very bad these days..."

    Then again, he was never one for short term gains. In the long term, he will not look so silly after all. His policy/strategy has always been "buy and keep", not "grab the profits and run" !! The Grandmasters of Wall Street were the ones most keen on the "grab and run" and look where it got them !! Buffet always had, and will have, my respect !!

  • Comment number 18.

    In a global business environment it makes every sense to employ qualified people from around the world on the MPC providing that they are genuinely committed and interested in the real state of the UK economy and society. In this case, Posen's expertise is presumably around his knowledge of Japan - since one hopes that King and Co know a thing or two about Europe and macroeconomic policy which are Posen's other research interests. Unfortunately, in my experience when experts appear on the bridge, their expertise is sometimes given a little too much weight. They can easily present facts and figures which their colleagues cannot dispute easily and hence if they have teeth, their influence can be out of proportion to their perceived wisdom. Furthermore, everyone with an academic background has their favourite theories they want to promote and for a while, these may be flavour of the month as with Posen's arguments for fiscal stimulus in Japan back in the late 1990s. However, perhaps as a revolutionary change the MPC should think about incorporating some ordinary British people (who may not even have a degree in ecomomics), but who can honestly say how life is affected by interest rate changes creating low savings rates, unemployment, house price movements, credit card charges, etc. These are things which probably current members of the MPC only see as figures on sheets of paper. People earning over £100K per annum are generally so out of touch with reality, they are not the ones committed to making the necessary changes.

    I wish Posen every success and I am sure he will do his best. However, I just wish our ruling elite would stop thinking that you always have to have a PhD in economics to see how to fix the problem. Most of their theories are just that - theories. What we need are a few more people who repesent the broader society that these policies are meant to fix.

  • Comment number 19.

    One of the many tragedies of the western World's regulatory systems is that its interrelatedness is not well understood and frankly I can't think why?

    This new chap may be young and dynamic but if he was educated into the same fundamentally flawed ideas of economics taught at Harvard (or Balliol) over the last two decades.

    Their teaching MUST have substantially contributed to the Credit Crunch. (Leaving aside Milton Friedman's silly ideas that underpinned and gave intellectual support for Thatcherism and Reganomics.)

    We are still doing the wrong things! These are after all the people who gave intellectual respectability to ignoring house price inflation and zero interest rates and the dafter quantitative easing! They seem to be surprised that ever lower interest rates gave rise to ever more exotic and dafter and exotic ways for the financial community to fiddle the books to show that they were still making money.

    None of the economists in the current cadre of those educated in the unscientific and 'fake science' of economics in the last quarter of a century are fit and proper persons for any responsibility even over a whelk stall let alone the Bank of England's interest rates policy - they have shown by creating the conditions for the recent credit boom and bust that they have failed and their education is a failure.

    (In this I agree with the opinions expressed by the majority of the posters to this blog.)

    (MMG - Mervyn Must Go)!

  • Comment number 20.

    MarcusAureliusII # 16

    "All you have to do is look at the last depression and recovery that started with the stock market crash beginning in 1929, realize that the same concepts of laissez faire capitalism and easy credit to buy assets which were the collateral for that credit created a highly speculative bubble market in that asset, and then look at the shape of the recovery in the 1930s to know that history seems to be repeating itself."

    Your statement above is more or less correct. However, to blame laissez-faire capitalism for what happened in the US during the 1920s and what happened from 2001 to 2006/7 is erroneous my friend. You need to ask yourself which institution is responsible for creating easy credit conditions; it is definitely NOT the free market that's for sure.

  • Comment number 21.

    #13 glanafon

    From the UKs perspective in particular, you are absolutely right.

    Successive governments have found it convenient to encourage the myth that, merely by owning property, one can increase one's personal wealth. Much of the population has regarded a house as rather like a lottery ticket with a guaranteed eventual return. For the last 40 years, this has diverted savings from real investment in the things that our society needs, to the national speculative pyramid scheme that is the property bubble. This collective obsession has distorted, and continues to distort, the British economy.

    In the end, there is no such thing as "owt for nowt": somebody else pays. At the moment, it is those with negative equity and those who have lost their jobs.

  • Comment number 22.

    Let's hope the new player can save Britain from the threat of relegation.

    After a run of bad form we need a star performer to lift the team.

    Personally, I'm all for fiscal stimuli, especially when we don't have the money held in reserve. Spending more of the money we don't have always causes great exitement towards the end of the season.

    If only we'd spent less than we earned earlier in the season, we wouldn't have slid so quickly down the league table. Britain has a poor goal difference, but let's hope the new player will help tackle this.

  • Comment number 23.

    Stephanie, you neglected to mention whether this appointment is one of Brown's or Mervyn's. I understand Brown appoints about half of the "independent" MPC?

  • Comment number 24.

    In my view if he is not associated with the Goldman's cabal in the US his analysis of japans lost decade could be helpful in steering a path forward. His nationality is of no importance and given the importance of the US in global financial markets it makes some sense to have an outside perspective. However, it seems to me that it may be a mistake to stuff the MPC with professional academic economists as it would appear that they at times fail to see the wood for the trees. They also appear to do a good line in post hoc rationalisation eg Whilst CPI is going up the focus is turned towards RPI. Question, why was RPI not a focus when it was clearly indicating an asset price bubble that got us into this mess.
    BTW my youngest daughter has taken her A levels in economics maths and geography this month and i was intrigued that whilst her economics course primarily focussed on the mechanics of markets, inflation, PSBR etc it was the Economic systems section of her geography text book that gave a good analysis of problems in the global banking system written by Andy palmer and Nigel Yates and published in 2005. They analysed the financial banking crisises in the global economy tracing its roots back to the oil shocks in 73 and 79 through the near financial collapse of Mexico 1982 through to Argentina in 2000 it concludes. " The banks have worked hard to recover their losses by massively expanding personal lending in the MEDCs leaving the UK with a personal debt mountain of £151 billion of unsecured debt" It goes on to conclude ( in 2005) that the debt crisis was not over and would come back with a vengence.

    I therefore suggest that what we need on the MPC is more geographers like Andy palmer and Nigel Yates who were clearly not taken in by the bankers unlike Merve the swerve and his ilk

  • Comment number 25.

    MUCH ADO ABOUT NOTHING

    In a Liberal-Democracy, it's much easier to put people in places to ensure that things don't happen, than it is to ensure that things do.

  • Comment number 26.

    All these experts from around the world, and yet still the economy ended up in one of the biggest messes in history.

    I'm sure this new chap knows how to treat the symptoms of a badly infected economy. Treating symptoms is so much better than preventing the illness in the first place.....as we all know.

    I'm sure his monetary policy knows how to prevent unemployment increasing......

    And we do need experts to tell us that insolvent banks need to clean up their balance sheets, because that would never have occurred to anyone but an expert.

  • Comment number 27.

    WHO PAYS THE PIPER?

    MrTweedy (#26) And as Darling has said, it's down to the banks to behave responsibly. We can't expect some agency to ensure that is so, after all, that would be socialist, and we all know that that's very bad. Why else would they be described on the news (e.g. coverage of the SCO) as dictatorships?

    Fortunately we aren't dumbed down, we have degrees these days.

  • Comment number 28.

    There are some anti BoE comments on the posts which might be justifiable where its functions relates to financial stability oversight.

    As far as the Monetary Policy Committee is concerned, it has two limited jobs : 1) maintain price stability as instructed by Govt at 2% CPI 2)subject to that, support Govt's economic policy to achieve high and stable levels of growth and employment.Price stability is the driver.

    The 'independent' members, which I think Posen will be one of four, are not some mavericks brought in to upset the apples. Darling appointed them on recommendation of two Treasury mandarins who shape government policy and an ex mandarin / deputy governor.

    Posen will have access and influence over two levers on price stability : interest rates and new-fangled government-scoped QE. Much that it is great he's an expert on Japan, banks, global issues, his own man etc. he is specifically briefed.

  • Comment number 29.

    24 Tao das

    I agree, we do need more Geographers running things rather than lawyers and economists. After all Geography is just a way of looking at the world, any discipline (academic or otherwise) regarded from a spatial persepective is welcomed under its very wide umbrella.

    Though speaking as a Geography graduate, I would say that, wouldn't I?

  • Comment number 30.

    ThorntonHeathen (#29) "any discipline (academic or otherwise) regarded from a spatial persepective is welcomed under its very wide umbrella."

    There's hope for you yet!

  • Comment number 31.

    ThorntonHeathen # 29

    Economists and lawyers don't "run things", neither can geographers.

  • Comment number 32.

    ANARCHY IN THE UK

    LibertarianKurt (#31) "Economists and lawyers don't "run things", neither can geographers."

    Presumably, because through an infantile/adolescent pathologically narcissistic obsession with individualism, anarchists can't conceive of anyone 'running things' - that would be dictatorship. I blame the parents.

    In the final analysis, British politics since 1979 has just been the erosion of all that the Labour Party built after 1945.

    The Cold War isn't over. :-(

  • Comment number 33.

    The Anglo Saxon model is dead

    Long live the Anglo Saxon model.....rinse sppin repeat


  • Comment number 34.

    JadedJean # 32

    "I blame the parents."

    Yes, so do I - "Mummy" and "Daddy" government!

  • Comment number 35.

    # 31. LibertarianKurt
    The original point was that The A level economics text books (and the majority of economists ) failed to warn of escalating consumer debt and the drivers which lay behind behind it (imbalances in global trade)Whereas, the A level geography text book I reffered to did warn in 2005 that consumer debt was out of control and would lead to another banking crisis.
    Both text books deal with economic systems however the geographical ( spatial) analysis takes a much broader global perspective and highlighted that the oil states following the 73 / 79 oil shocks had more money than they could spend. It was this huge surplus of hot money that was fed through the global banksing system into many of the emerging economies as europe and the US were driven into a slump following the oil shocks and the demand for personal and commercial loans had all but dried up. The hot money was fed into the emerging economies high risk high return but subsequently, led to the financial collapse of a number of countries that had to be rescued by the IMF between 1982 and 2000.When mexico defaulted in 1982 it almost brought the whole us banking system down . Faced with huge losses, the global banking system, to try and recover next turned to expanding and targeting consumer debt hence the huge rise in unsecured debt and sub prime mortgages from about 200 onwards. In 2005 the A level text book I referred to in the original post warned that this expansion of consumer debt was unsustainable and would lead to another banking collapse.
    I only came across this analysis as a result of helping my daughter with her revision. However, I was impressed by the global perspective brought by the geographers and the fact that they were warning of the problem in 2005 when GB and his economic analysts in the treasury including Ed balls thought that it could go on forever.

  • Comment number 36.

    LibertarianKurt (#34) JadedJean # 32

    "I blame the parents."

    Yes, so do I - "Mummy" and "Daddy" government!"


    That's what most people want. That's what most people have had throughout history. That is, all except narcissists who have radical separation-individuation identity problems which render them anarchistic.

  • Comment number 37.

    JadedJean # 36

    "That's what most people want. That's what most people have had throughout history."

    Yes, and they got far more government than they bargained for, or as P.J. O'Rourke aptly describes:

    "What is this oozing behemoth, this fibrous tumour, this monster of power and expense hatched from the simple human desire for civic order? How did an allegedly free people spawn a vast, rampant cuttlefish of dominion with its tentacles in every orifice of the body politic?"

  • Comment number 38.

    LibertarianKurt (#37) You appear to favour authors who would be better suited as guests on Newsnight Review rather than Newsnight.

  • Comment number 39.

    tao-das # 35

    "Whereas, the A level geography text book I reffered to did warn in 2005 that consumer debt was out of control and would lead to another banking crisis."

    Presumably, this textbook of yours lists its sources, does it?

  • Comment number 40.

    # 39 LibertarianKurt
    Advanced Geography ISBN 13 978 1 84489 205-1 its a text book not a thesis there are no references specific to this analysis as the authors were describing verifiable facts which followed on from a debate regarding the validity and interpretation of kondratieff cycles.Interesting what they teach in geography these days.?
    I was never pro geography but i have to say the sylabus my daughter has studied has proved more relevent to giving her an understanding the way the world works than her economics studies sofar.

  • Comment number 41.

    LibrarianKurt

    "However, to blame laissez-faire capitalism for what happened in the US during the 1920s and what happened from 2001 to 2006/7 is erroneous my friend. You need to ask yourself which institution is responsible for creating easy credit conditions; it is definitely NOT the free market that's for sure."

    Then exactly who twisted the arms of bank and other financial institutions to lend money to people who couldn't possibly pay it back? Who told Chase Bank to offer me a home equity loan and a line of Credit for $600,000 based on my home equity I couldn't possibly pay back on my income? The US government? What a fool I was not to grab it. I had a front row seat watching this happen but I never knew about the CMOs or the CDSs. That came as a complete surprise.

    BTW, who forced the brokerage houses and banks to open 90% margin accounts in the 1920s? I suppose that was the US government also.

    You'd better take out a book on economics from the library and bone up. Better get one on history as well. I think there are a few good ones out on circulation that will be back on the shelves as soon as Ted Geitner and Alan Greenspan get done reading them.

  • Comment number 42.

    MarcusAureliusII (#41) "Then exactly who twisted the arms of bank and other financial institutions to lend money to people who couldn't possibly pay it back?"

    You are arguing with an anarchist (sounds like anti-christ doesn't it?) who does not believe that what he says or thinks should be dictated by empirical reality (see Satan, Beelezebub, etc they are Legion!). Like the US Treasury and FED, the Credit Crunch crisis can easily be explained by those inscrutible (aka 'evil doing terrorist') Chinese socialists/statists forcing their poor oppressed people to save rather than bask in the luxuries (e.g. sex, drugs, gambling, debt, obesity, alcoholism, family breakdown, adultery, violent crime etc) afforded by libertarian free-market capitalism championed by NYC and London

    See N Korea for a less inscrutible/diplomatic view of the SCO's and general Sino-bloc's stance ;-).

  • Comment number 43.

    INTENSIONAL OPACITY

    The Iranian Ambassador has been called in because the British Government doesn't like being called 'evil'.... Has the Supreme Leader been reading the Telegraph?

  • Comment number 44.

  • Comment number 45.

    Very interesting and enlightening comments

 

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