tag:blogger.com,1999:blog-7820485130017459619.post1301169791428580024..comments2023-10-24T01:46:47.151-07:00Comments on CynicusEconomicus: Isn't all Growth built on Debt?Unknownnoreply@blogger.comBlogger2125tag:blogger.com,1999:blog-7820485130017459619.post-43374147062967396412008-11-17T03:50:00.000-08:002008-11-17T03:50:00.000-08:00“Without the factor of house price rises, the cred...“Without the factor of house price rises, the credit bubble would have burst much sooner.”<BR/><BR/>Consider the following two actions by the UK Government:<BR/><BR/>1. In December 2003, Gordon Brown "changed the Government's inflation target to a new base: a CPI of 2%, from the previous target of RPIX of 2.5%."<BR/>(FAQs: The UK target measure of inflation, ONS website)<BR/>"The CPI excludes a number of items that are included in RPI-X, mainly related to housing, and as such is considerably lower ... The two indices are also calculated differently. The different techniques used to combine individual prices in the two indices also reduces CPI inflation relative to RPIX."<BR/>(http://www.moneyextra.com/dictionary/consumer-price-index-003666.php )<BR/><BR/>2. It can be seen that the growth rate of broad money rose from 7 per cent in January 2004 to above 14 per cent by the end of 2006. (http://www.marketoracle.co.uk/Article2880.html )<BR/><BR/>So, the measure of inflation was changed to omit house prices and immediately after this the money supply was progressively increased from medium to high. The result was artificially low interest rates despite both monetary inflation and soaring house price inflation.<BR/><BR/>If the UK Government did not want to exacerbate house price inflation then surely it would not have undertaken these actions simultaneously.<BR/><BR/>Is it therefore reasonable to conclude that this policy was adopted by the Government to prolong the credit bubble?Jonnyhttps://www.blogger.com/profile/16119442844302447926noreply@blogger.comtag:blogger.com,1999:blog-7820485130017459619.post-28953225880681776132008-07-30T16:05:00.000-07:002008-07-30T16:05:00.000-07:00Mark,Thanks for taking the trouble to answer my (f...Mark,<BR/><BR/>Thanks for taking the trouble to answer my (financially illiterate!) question.<BR/><BR/>I guess that what I was really driving at is that it is 'ordinary' people who are controlling the economy, and I include the bankers in that category. After all, bankers are just as likely to desire shiny baubles as their customers, and that will influence them when the time comes to tick the 'accept' box.<BR/><BR/>What is your opinion on a more rigidly planned economy? Has the concept been thoroughly discredited, or are there any successful examples? For it to work, we would need some sort of 'world order' wouldn't we?Anonymousnoreply@blogger.com