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

Voting history

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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Question 1; Do you agree that euro membership should be compulsory for all EU member states?

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Answer:
Strongly disagree
Confidence level:
Extremely confident
Comment:
The participation in the euro of countries that manifestly were not capable of sustaining the necessary policies, given that it cannot be a 'transfer union' because of strong German opposition to this idea, has proved a major problem for the euro-zone and has led to a long 'euro-crisis'. Instead Juncker should have argued for reducing the number of countries by removing those that looking forwards may well still not be able to participate successfully. To add yet others potentially in the same category is inviting yet further future disasters.

Happiness and well-being as objectives of macro policy

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Question 2: Do you agree that quantitative well-being analysis should play an important role in guiding policy makers in determining macroeconomic policies?

 
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Answer:
Disagree
Confidence level:
Confident
Comment:
My reason relates to what I have said. I cannot see that we can get a fine measure of the effects of macro policies on wellbeing. We can however estimate how policies might impact on economic volatility and consumer welfare conventionally measured.

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