Blame finally laid at Carney's feet for £ slump

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Jon Irenicus
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Blame finally laid at Carney's feet for £ slump

Post by Jon Irenicus » Sat Aug 04, 2018 10:42 am

https://www.telegraph.co.uk/politics/20 ... fall-pound

https://www.telegraph.co.uk/business/20 ... ics-brexit

It only took two years!

Just FYI the articles are behind a registration wall.
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Merlin
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Re: Blame finally laid at Carney's feet for £ slump

Post by Merlin » Sun Aug 05, 2018 2:43 am

He needs to be called out hard on the fearmongering part. But allowing the pound to take a slump was a brilliant maneuver from the BoE which avoided a real recession due to Brexit. It would have been quite easy for Carney to “defend” the pound and throw the country into a massive recession, killing Brexit for good. He didn’t. All in all, he was the right man at the right time.

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Re: Blame finally laid at Carney's feet for £ slump

Post by Physiocrat » Sun Aug 05, 2018 7:38 am

Merlin wrote:
Sun Aug 05, 2018 2:43 am
He needs to be called out hard on the fearmongering part. But allowing the pound to take a slump was a brilliant maneuver from the BoE which avoided a real recession due to Brexit. It would have been quite easy for Carney to “defend” the pound and throw the country into a massive recession, killing Brexit for good. He didn’t. All in all, he was the right man at the right time.
Counterfeiting is bad policy at all times. Lowering the base rate to 0.25% was entirely unwarranted. I'm not saying he should have jacked up interest rates to increase the value of the pound but making it worse by lowering the interest rate was destructive.
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Jon Irenicus
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Re: Blame finally laid at Carney's feet for £ slump

Post by Jon Irenicus » Sun Aug 05, 2018 9:29 am

Why would it cause a recession? Considering that none of project fear's predictions materialised, other than the weakened £...
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Re: Blame finally laid at Carney's feet for £ slump

Post by Physiocrat » Sun Aug 05, 2018 3:56 pm

Jon Irenicus wrote:
Sun Aug 05, 2018 9:29 am
Why would it cause a recession? Considering that none of project fear's predictions materialised, other than the weakened £...
Indeed
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Merlin
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Re: Blame finally laid at Carney's feet for £ slump

Post by Merlin » Sun Aug 05, 2018 11:01 pm

Jon Irenicus wrote:
Sun Aug 05, 2018 9:29 am
Why would it cause a recession? Considering that none of project fear's predictions materialised, other than the weakened £...

Due to the uncertainty that Brexit caused, the demand for cash balances shot up, which was entirely predictable given the size of the adjustment that the British economy will have to go through now. Had the rate not been adjusted, these cash balances just wouldn’t have been there, cousin monetary circulation to dry up, prices to fall, and panic to begin.

By lowering the rate, the BoE “brought forward” funds from the future to the present and made sure that added liquidity was there to meet the demand.
Now, managing the short-term rate might not be the best transmission mechanism, but QE (which would have been preferable) or buying up huge sums of Euros (which would have been best) would have been unacceptable so it was either a lower rate or recession.

And remember, it’s not counterfeiting if the owner of the trademark (the BoE) does it.

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Re: Blame finally laid at Carney's feet for £ slump

Post by Physiocrat » Mon Aug 06, 2018 12:15 pm

Merlin wrote:
Sun Aug 05, 2018 11:01 pm
Due to the uncertainty that Brexit caused, the demand for cash balances shot up, which was entirely predictable given the size of the adjustment that the British economy will have to go through now. Had the rate not been adjusted, these cash balances just wouldn’t have been there, cousin monetary circulation to dry up, prices to fall, and panic to begin.
The sticky prices canard again :roll:
Merlin wrote:
Sun Aug 05, 2018 11:01 pm
but QE (which would have been preferable) or buying up huge sums of Euros (which would have been best) would have been unacceptable.
They did that too to the tune of around £200bn IIRC.
Merlin wrote:
Sun Aug 05, 2018 11:01 pm
And remember, it’s not counterfeiting if the owner of the trademark (the BoE) does it.
Trademark like all IP is illegitimate. Further when the government has destroyed metallic money which was broadly the market chosen money any increase of the monetary base (credit is different in that it can't be a unilateral decision) above the increase in the gold stock is akin to counterfeiting.
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