Bank of England Speech - Charles Bean

Morphing into Mr Bean is not so bad if it is this one, his speech is here. I found it on David Smith's blog (see blogroll). Some quotes:

At root, the problem is one of a lack of trust in a context of incomplete information about the scale and distribution of the likely losses associated with mortgages, other loans and derivative products. As the experience of Japan during its ‘lost decade’ attests, a return to normality in the banking sector requires both credible revelation of those losses, as well as injections of fresh capital.

But the MPC targets CPI inflation, not house prices. It is therefore the impact on demand – and thus on inflationary pressure – that matters to us. Some commentators look at the historically strong correlation between house price inflation and consumption growth (Chart 5) and conclude that if house prices fell significantly, then that would also generate a sharp slowing in consumer spending. But it is not clear that this need be so. Lower house prices do not make us collectively worse off. They merely redistribute wealth from home owners who expect to trade down to those not yet on the housing ladder or who are still moving up it. So any decline in the value of the housing stock should not have much net effect on spending through the so-called ‘wealth effect’.

Discussing the question of how globalisation affected the UK, he points out the well-known fact of the lower prices, increased opportunities for businessmen to choose international factors of production, in particular labour, and so forth, but then:

But this beneficial tailwind from globalisation has gradually turned into a headwind. The biggest gains from the integration of the emerging market economies into the global trading system probably came early on as the most obvious opportunities to outsource and offshore were seized. Moreover, one would expect that as these economies develop, so their real labour costs will gradually catch up with those in the advanced economies, eliminating the original gains from trade.