No way.
An economist being wrong?
Surely not?
I don't quite get this recent Tweet from Mr Blanchflower...
So why did the @bankofengland raise rates last week given they forecast an 8 qtr recession before 60bn in spending cuts/ tax increases asking for many millions of friends? On the day ceo pay shot up again
— Professor Danny Blanchflower economist & fisherman (@D_Blanchflower) November 7, 2022
It sounds political. And he's effectively arguing the BoE shouldn't have independence if it is to be at the whims of fiscal policy changes.
A few months ago, Danny had an opposite position...
Rishi Sunak threatens independence of @bankofengland arguing he wants unempt rate=10%
— Professor Danny Blanchflower economist & fisherman (@D_Blanchflower) July 16, 2022
I want to get a grip of inflation because inflation is what makes everybody poorer.
If we don’t get a grip of it now it will last longer and that is not a good thing. https://t.co/Rd6z4XC4D0
All of their economic policies are from lalaland none have said how they will get inflation down, whether they back @bankofengland independence and how much they are prepared to raise unemployment - their problem is that the bond, stock and foreign exchange markets will speak
— Professor Danny Blanchflower economist & fisherman (@D_Blanchflower) July 17, 2022
Back in November 2021, Danny had also been saying that the BoE should have been cutting rates - without the fiscal cuts...
Just done interview for @BBCr4today for tomorrow on why I shouldn’t believe a word Governor Bailey says he is indeed unreliable boyfriend #2 - if he didn’t want markets to expect a rate rise he should have corrected/clarified his statement in last week & plausibly next move a cut
— Professor Danny Blanchflower economist & fisherman (@D_Blanchflower) November 4, 2021
So what do you want?
The funny thing is, I don't actually disagree with him.
Why should rates go higher to dampen demand if there is a big risk of recession?
And I have argued a cure for this before, by using an NGDP target rather than an inflation target 👇
❓ A question...
— Macrodesiac (@macrodesiac_) July 13, 2021
Without Googling, which central bank came up with the concept of inflation targeting to base monetary policy decisions on?
This is not to get at Danny since we all change our tune (I was completely wrong about inflation being transitory coming into 2022 for example), but more the fact that there is changing your mind then simply blowing against the wind.
It certainly brings up the point as to whether inflation targeting is the right way to go though.
Why target a change in prices when the overriding outcome that we want is positive growth?
As I mentioned in that Tweet thread, of course if inflation gets way out of control then that is an issue, and yes, GDP might not always provide the best economic outcomes, but we can surely innovate out monetary policy in a way that's more flexible?
We need a bit (understatement) of a change (and not just because I'm SO bored of talking about inflation) and perhaps it'll come now that we're in this post pandemic period.
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