Thursday, 1 May 2008

Chief economists of large banks want to keep the housing bubble inflated

That isn't a surprise, large banks of course want to keep the bubble artificially inflated because it serves their bottom lines. Even Nationwide's chief economist, Fionnuala Earley, wants a reduction, (I say even because Nationwide isn't shareholder owned so puts its memebers first.) But it is amazing that the Central Bank wants to keep housing unaffordable for the majority of people, as David Blanchflower of the MPC at the BoE stated,

David Blanchflower, a member of the Bank's Monetary Policy Committee which sets interest rates, said in a speech on Tuesday that house prices could fall by 30% over the next few years if interest rates were not cut.

He added: "I am not suggesting that such a drop will necessarily occur, but it may. Cutting interest rates now may help to prevent such a dramatic fall."

A regular cheerleader for lower rates, Mr Blanchflower said "aggressive action" was needed to stop a downturn in the economy.

Why should the government intervene to keep housing unaffordable for its people?! In what world is that a sane policy?