A smack in the face from inflation

Roger Bootle is a British monetary economist.  He had a good run a few decades ago.  Since then, his warnings about monetary instability and inflationary risk have appeared less prescient.  

But the next few decades may be kinder to him (if not to us).

Continue reading “A smack in the face from inflation”

Houses (and their prohibitive prices) will be high in Ardern’s considerations as she appoints her ministerial team

One  of  the   strange  outcomes    of  the   Covid-19 pandemic   has  been  the  surge   in  house  prices,  not  just  in  Auckland   but through the  rest of the  country.    It’s  a   phenomenon  that  runs   contrary   to  past  experience  when the   economy   has  slipped  into  recession.

Many  authorities  say booming house  prices are being  driven  by  the  loose  monetary policy  operated   by the  Reserve  Bank    in conjunction  with the  economic   stimulus  applied  by the  government.   Mortgage   rates   have  fallen,  with  at  least   one  bank    offering  a  rate below   2%.

The   Reserve   Bank’s  chief  economist  Yuong  Ha  is  on  record  as  saying:

The worse situation we’d face right now is actually if we had house prices falling”.

Just  why  that   might  be  the  case    in the  present recession  has  not  been  made  clear,   though he  seemed  to  suggest   the  wealth  effect   of  rising  property prices  is  helping to  sustain  the  economy. Continue reading “Houses (and their prohibitive prices) will be high in Ardern’s considerations as she appoints her ministerial team”