Patrick Minford's picture
Affiliation: 
Cardiff Business School
Credentials: 
Professor of economics

Voting history

House Prices and the UK economy

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Question 2: Do you agree that a more widespread weakening of the UK housing market will slow UK GDP growth significantly?

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Answer:
Strongly disagree
Confidence level:
Confident
Comment:
Yes, there is some connection between the housing market and consumption but this is because both are driven by business cycle income effects; housing spending has a high income elasticity and so is highly correlated with consumption. Currently the UK is experiencing a steady business cycle expansion whose demand direction is being shifted by the Brexit devaluation of some 15%, away from consumption towards net exports, profits and business investment.

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Question 1: Do you agree that the phenomenon of declining house prices will ripple out from the London property market leading more UK regions to experience falling prices?

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Answer:
Strongly disagree
Confidence level:
Very confident
Comment:
There are good signs of steady upward movement now outside London. London has been exceptionally strong until the recent correction. This seems to be a specific London correction, due to the stamp duty rate and also fears about a Corbyn attack on non-doms plus high taxes.

Global risks from rising debt and asset prices

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Question 2: Is the loose monetary policy of major central banks responsible for the recent increase in global leverage or asset values?

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Answer:
Neither agree nor disagree
Confidence level:
Confident
Comment:
See my answer above. Partly responsible but as part of the overall regulatory/monetary situation. Central banks can be considered generally responsible for the financial crisis and the responses to it. They permitted/encouraged a huge credit boom in the 2000s; they then brought in regulations that precipitated difficulties in the interbank market; these were not prevented by central banks from triggering the collapse of the system from Lehman on. Subsequently they have continued to over-regulate and over-buy bonds. The mess is in general due to poor central bank behaviour from 2000 onwards.

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Question 1: Does the world economy face heightened risks arising from an excess of public and private debt and/or inflated asset prices?

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Answer:
Disagree
Confidence level:
Confident
Comment:
We have had an unprecedented period of 'loose' monetary policy in the form of interest rates at the lower bounds and massive QE. However we have also during this period have had unprecedented regulation of banks' balance sheets, notably the imposition of extremely high capital requirements. These have caused banks to shrink their balance sheets and especially to cut lending to smaller firms. Furthermore the massive QE has resulted in small rises in lending or the money supply because banks have mainly held the extra deposits in the form of reserves at central banks. This reflects their unwillingness to lend due to the regulatory capital demands. In a recent book edited by Tim Congdon, economists as diverse as Tim, Charles Goodhart and Steve Hanke have strongly criticised the regulative and other central bank/government policies that have produced these effects. What we have is not so much monetary 'looseness' as a monetary system hugely distorted by this combination of drastic regulation and massive monetary open market operations. Therefore yes there are some borrowers (including governments) who have benefited from the availability of absurdly cheap credit; and others who have been badly held back. The economy has managed a recovery but one marked by weak credit growth to small companies and poor productivity growth, possibly associated with weak competition and excessive survival among large companies.

Juncker's State of the Union Address

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Question 2: Do you agree that the euro has had more benefits than costs?

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Answer:
Strongly disagree
Confidence level:
Extremely confident
Comment:
The euro-zone crisis has caused an enormous cost to the EU in terms of lost output and employment besides any knock-on effects into policies that have further restricted the environment for growth. By these last I mean a) policies for 'union' that have been manifestly inimical to the supply-side such as the financial transactions tax and b) macroeconomic policies that have been asymmetrically orientated towards demand restriction because of German unwillingness to take account of the effects of its trade surpluses on the rest of the zone. These costs have been at the level of macro policy. I agree that there have been some gains at the micro level in terms of lowered costs of inter-trade- such costs are largely of the order of 'triangles' of consumer surplus due to eliminating a distortion. But the macro costs have been so great as to swamp these because they are of the order of large persistent percentage losses to employment plus ongoing dynamic losses to growth.

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