Yesterday’s news of the effects of George Osborne’s Funding For Lending scheme came as no surprise to those who understand the basic premise that monetary inflation results in asset price inflation. In a video we posted earlier we saw how house prices and gold tend to shoot up with monetary inflation.
Heath also, points out that for your average Keynesian this is a good thing! Rising house prices fuel so called “aggregate demand” by a) giving consumers confidence as they feel richer (even if they aren’t) b) consumers are able to withdraw equity from their home.
With house prices still considered overvalued does it make sense to blow the bubble even more?
Worryingly, Adam Posen (former MPC member) recently voiced support of using quantitative easing to buy up mortgage securitisations , ie. the product that was at the centre of the financial crisis!
As we pointed out, a gold fish has a better memory of history than the Bank.