Duncan’s Economic Blog

Bloomberg on Cameron

Posted in Uncategorized by duncanseconomicblog on October 9, 2009

I sometimes think that those you work outside finance don’t ‘get’ what a big thing Bloomberg is. The public website is decent enough, but nothing beats an actual Bloomberg Terminal (and at $1,500 per month, I’d hope not). There are thousands of them around the world, in every fund managers office, on every trading floor. It’s used for everything – data, news, charting, messaging other people, trading – you can even book flights  through them. For many people in ‘the city’ not five minutes goes by without glancing at the terminal, checking news, checking prices.

So stories that make the Bloomberg top news page get a lot of readers.

I think this one is worth sharing.

 Oct. 9 (Bloomberg) — Conservative leader David Cameron’s suggestion that the Bank of England end its asset purchases soon was criticized by two former central bank officials, a setback to the opposition’s effort to build credibility on the economy.

David Blanchflower, who left the bank’s Monetary Policy Committee in May, said Cameron’s speech yesterday was “bizarre” and if put into practice may tip the U.K. into a “depression.” Shamik Dhar, a former Bank of England economist, said “at best this is wrong and at worst downright dangerous.”

Without mentioning the central bank, Cameron told his party’s conference in Manchester that he opposed creating money, saying “sometime soon that will have to stop, because in the end, printing money leads to inflation.”

“I’ve been quite a critic of the Bank of England’s tactics in printing money, but the principle is a very good one,” said Steven Bell, chief economist at London-based hedge fund GLC Ltd. and a former U.K. Treasury official. “It has lowered bond yields and improved prospects for economic recovery.”

The yield on the 10-year U.K. government bond was 3.35 percent yesterday, compared with 3.64 percent on March 4, the day before the effort started.

Bell said Cameron’s remarks suggested that the Conservatives may reverse the policy if they win the election, due by June 2010, and that the comments were “unhelpful and surprising.”

Cameron’s remarks about the central bank are unlikely to register with voters, though attacks on his economic credibility might, said Andrew Hawkins from ComRes Ltd., a polling company.

“I don’t think people have understood Cameron’s economics and it is his weakest flank,” Hawkins said.

“If we stopped supporting the economy now it would crash,” Darling said. “Every country in the world and just about every informed commentator is saying the same thing. The job is not finished. The Tories have been wrong at every turn.”

Blanchflower said Cameron’s program was “the most wildly dangerous thing I have seen in a hundred years of economic policy in Britain.”

The economist from Dartmouth College in Hanover, New Hampshire, who was among the first to urge the central bank to stimulate the economy, said the Conservatives showed “no understanding of economics. It could drive the economy into depression.”

Dhar, now an economist at Fathom Financial Consulting in London, said that the central bank’s asset-purchase program, known as quantitative easing, should continue as long as institutions hoard cash and ration loans.

“Obviously, you have to stop QE at some stage, but this sounds like he’s ideologically opposed to it,” Dhar said. “It’s only ideologues that want to cut it off.”

“Printing money will lead to inflation when you’ve got an economy running with no spare capacity, but that’s not the case now,” said Peter Dixon, an economist at Commerzbank AG in London. “We could print money without inflation for some time to come. Now is not the time to take back unconventional stimulus measures, that’s a long way down the road.”

(All emphasis mine)

8 Responses

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  1. Paul said, on October 9, 2009 at 10:16 am

    Blanchflower on Cameron: ‘This is the most wildly dangerous thing I have seen in 100 years of economic policy in Britain.’ http://tinyurl.com/ykbmdol

  2. Will M said, on October 9, 2009 at 12:15 pm

    my hung parliament bet offer is rescinded.

    i think labour now have a fighting chance. the tories have been shite enough re. budget deficit on the one hand and the Bank of Englad on the other (and don’t lets forget scrapping the FSA) that Labour can move against them. Brown (or more likely Mandelson) can credibly claim that Cameron and the Tories don’t understand finance or economics. “They haven’t learned the lessons of the Great Depression, the 1960s, 70s, 80s or now.” Enough groundwork has been done on the ‘novices’ theme that can be capitalised upon very easily.

    And you keep that in the news agenda by getting financiers to back the Labour Party. No-one knows who these people are, so you can pull them out of a hat, interview them on the BBC with the Gherkin in the background, and the public will think big business has no confidence in the Tories. You’ll get a 1992 election result, but that’s liveable.

  3. (Layman) Mike said, on October 9, 2009 at 12:23 pm

    Talking of ending quantitative easing is empty Tory populism (the spectre of inflation). As yet, the programme isn’t planned to continue into next year and the election isn’t until May (no?). Rather like talking of ending Incapacity Benefits with the knowledge that Labour already did this with Employment Support Allowance (benefit-bashing). Or Osborne’s supposedly “brave because it’s honest” speech which was neither brave nor honest. His public sector cuts won’t significantly reduce the deficit (public sector bashing), while savings remove money from circulation (spectre of inflation again). In fact, considering that the Labour government have been hammered by the media and the polls for two years, the Tory conference didn’t happen.
    I’ll give you the next Tory economic plan: high unemployment and high interest rates. So, if there’s a Tory government next year (and that’s very much an if) and we’re still in recession, it’s going to be a long recession.
    Just my opinion.

  4. dannyboy said, on October 9, 2009 at 1:07 pm

    this issue is being debated now on http://www.housepricecrash.co.uk, normally a hotbed of tory support

    http://www.housepricecrash.co.uk/forum/index.php?showtopic=127417

    interesting responses.

    • duncanseconomicblog said, on October 9, 2009 at 1:15 pm

      Dannyboy,

      Interesting!

      HPC forum members are not my biggest fans. My personal favourite comment there recently being:

      “This guy is doing economics a huge favour.

      He’s a socialist, he can think and he’s able to communicate the key points of his doctrine in a way that anyone can understand.

      This should be textbook stuff for any economics student, even a child could point out the glaring flaws inherent in the socialist agenda given the clarity of this material. “

  5. […] for example, and Wynne Godley in the letters.  Duncan finds plenty of evidence that people doubt the timing of the Tories on quantitative easing.  Martin Kettle as well find the Tories ‘doctrinaire‘ in their small-government […]

  6. newmania said, on October 10, 2009 at 3:05 am

    In fact, considering that the Labour government have been hammered by the media and the polls for two years, the Tory conference didn’t happen.

    I see so that 17 point lead reflects a fair and honest assessment of New Labour , well you may have a point. I am not sure its inflation as much as interest rate rises that are the fear which comes to the same thing . Continuing to print money threatens every home owner directly and the hubristic conceit on display here is not attractive
    As far being hammered by the media is concerned the largest player in it is the \BBC which has an abiding loathing of the Conservative Party which , I assure you , is heartily reciprocated . Not only that but the Guardian and its whole world of lefty bourgeois sanctimony is financed by Public Sector Appointment ads for which there is no justification and which warps the whole media .
    Every day there sits the New Statesman ( cannot make a living ) and the Mirrror and the Guardian , if people want to buy them no–one is stopping them.

    In short this whole media whine is ridiculous and the other way round .

    And you keep that in the news agenda by getting financiers to back the Labour Party.

    If that were possible then the Labour Party would not be entirely reliant on the Trade Unions to “Finance it “ , would it . In practice the bank bail-outs were unavoidable , printing money equally so and New Labour are already cutting as fast as they dare . Government is far more reactive than this entire discussion allows and what no–one can deny is that had there been a Conservative Government it would have kept the books straight and we would have been faring infinitely better . Gordon Brown certainly agrees as his endless references to sound money and 40% golden rules shows . The country has grasped this and when Conservatives say Labour has once again run out of other people’s money it sticks because it is true .

    Mean while Mr . Sen is complaining that Conservative Policies are not properly costed …ha ha ha ha ha …oh dear …. Did we ever take that seriously , it seems so long ago My own feeling is that New Labour’s only chance of survival at all is to lose the next election

  7. […] as Duncan has blogged, Cameron’s words on QE ending are already alarming […]


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