Wednesday, 4 September 2013

Sending signals to the economy

The Financial Times reports that a poll of purchasing managers shows that the UK services sector grew in June for its fastest rate for 6 years. This is yet another sign that the economy is far more active than the experts predicted, and surely time for the government and Bank of England stimuli to be removed or reined in. It seems to me that attempts to affect an increasingly complex economy are like sending signals to remote spacecraft. Because of the finite speed of transmission, by the time the signals are received, unless an eventuality is well anticipated, a course correction may be pointless or even dangerous.

House price rises may be welcomed in the Express, but surely a time when real wages continue to fall behind inflation is wrong to continue to schemes like Help to Buy, never mind Quantitative Easing.

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