May 30th, 2008
The FT reports today on a debate economists are having with the Bank of England (BoE). To summarise: the Bank of England does not seem bothered by falling house prices; economists are.
This is a very important debate for all those that have debts – because while house prices are falling, the debts on those houses loom larger for owners. According to the Office for National Statistics in May, unemployment is rising, and unemployment makes it hard, if not impossible, to pay off any kind of mortgage. This is the context in which the BoE is preparing to raise interest rates above the current 5% and appearing relaxed about falling house prices.
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May 29th, 2008
My friend the formidable economist, Mark Weisbrot put it most succinctly.
“Since the U.S. economy showed positive growth for the last quarter, some commentators in the business press are saying that we are not necessarily going to have a recession, or that if there is one it will be mild. This is a bit
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May 28th, 2008
Few people understand how one of the most important levers in a debt-laden economy – interest rates – are set. Many believe that the rate is simply a result of supply and demand – the supply of savings and demand for those savings. Not true. In fact in Anglo-American economies savings have precious little to do with it. Interest rates – those for short-term and long-term loans; safe loans or risky loans – are a social construct. They are decided by a committee of mostly men. In Britain, the official rate is set by the Bank of England’s Monetary Policy Committee. In the US the official rate is set by the Federal Reserve’s Open Market Committee.
But there is another, less transparent committee of men that set interest rates. They are members of the private British Banking Association, and they set a rate of interest known as the Libor rate …. as Bloomberg (27 May, 08) explains:
” Every morning the BBA, an unregulated trade group, asks member banks how much it would cost them to borrow from each other for 15 different periods, from overnight to one year, in currencies from dollars to euros and yen. It then calculates averages, throwing out the four highest and lowest quotes, and publishes them at about 11:30 a.m. in London. Three-month dollar Libor was set at 2.64 percent today.”
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May 27th, 2008
The Guardian reports today that one of Tony Blair’s key allies, Phil Collins, has bravely attacked Labour’s weakened leader. Collins singles out Old Labour’s ‘faith in the ‘benign’ power of the central state’ and suggests that Ed Balls’ policies for children will set the party on a path to tragedy.
When the most ardent
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May 27th, 2008
The Economist’s latest supplement (15 May 2008) on ‘modern finance under attack’ dubs the finance sector’s critics ‘Barbarians at the vault’. The magazine’s leader writers are confident of their analysis and unequivocal: “Bubbles, excess and calamity are part of the package of Western finance. And still it is worth it.”
In the same issue
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May 25th, 2008
The FT reported last Tuesday that ‘bugs’ in the computer model used by Moody’s the rating agency, were responsible for over-valuing certain ‘assets’ – actually parcels of debt. The foolish computer, which should have known better, rated these debt packages as AAA – i.e as safe as houses, certain to be repaid, and therefore
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May 22nd, 2008
by Ann Pettifor, 22nd May, 2008.
There has been much huffing and puffing in the financial media about Horst Kohler’s comments that financial markets have become “a monster” that must “be put back in its place”. The German president who was MD of the IMF from 2000-2004, compared bankers with alchemists who were responsible
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May 19th, 2008
By Jo Jamison, 20th May 2008.
One in eleven people in the UK are in debt or arrears (that is separate from their mortgage) but for people with mental health problems, this figure rises to one in four says the Mind Campaign launched on 10th May, 2008.
Worryingly, the research also
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In the September 2003 edition of openDemocracy I wrote:
Click here to read the full story in openDemocracy
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