Thursday, June 22, 2006
David Walton
Posted by David Smith at 09:45 AM
Category: Thoughts and responses

David Walton, an old friend and an excellent economist, has died suddenly. David, latterly a member of the monetary policy commitee, will be sorely missed. This is terribly sad. Here is the Bank of England's announcement:

"It is with great sadness that the Bank of England has learnt that David Walton, an external member of the Monetary Policy Committee, died yesterday evening, unexpectedly and after a short illness.

The Governor, Mervyn King, said "All our thoughts are with David's wife, his young children and his parents. David inspired the respect and affection of all his colleagues in the Bank, and today's news has come as a shock to us all, as it will to those who knew him in the City, where he made his reputation as an economist."


As the only voter for a rate rise in the last MPC meeting, his lone voice of sanity will be missed too.

Posted by: Terry at June 22, 2006 01:59 PM

It's a sobering thought to think that a somebody in their early forties could pass away in such a short space of time.

Posted by: Werewolves at June 22, 2006 05:22 PM

In a cynical world it becomes routine to question people’s motives but with the MPC members I think we have been incredibly lucky to have a group of people that have genuinely tried to do their very best for the rest of us. For David Walton and his contribution to the public good we can only say thank you and we salute you.

Posted by: Sandid at June 23, 2006 05:27 AM

What a world! Nice guy lives only 40s but assholes live over 90s or even 100s...

Posted by: hong kong at June 23, 2006 07:06 AM

They've genuinely tried to do their best, certainly. For everyone? Let's leave it at some of us. More recently they've missed their inflation target and pursued an unusual intervention policy to prop up the flagging housing market.

I'd guess from his more sensible outlook and attitude towards the long term economic effects of personal debt, his legacy is perhaps the idea that restraint is sometimes a good thing when credit is cheap.

Posted by: Terry at June 23, 2006 11:24 AM

I know some people yearn for higher interest rates at all times but that's unfair. Most of the time since independence inflation has been below target, and it's only crept slightly above it now despite a trebling of oil prices over the past three years. The MPC certainly hasn't pursued "an unusual intervention strategy to prop up the flagging housing market". Its interest in housing is confined to its impact on growth (mainly through consumer spending) and therefore inflation. My guess is that if the Bank thought a housing crash was necessary to deliver low inflation, it would be perfectly prepared to stomach one. After all, Mervyn King has not been shy in talking about the overvalued house prices.

Posted by: David Smith at June 23, 2006 01:11 PM

Inflation has crept above the current target only after a rather drastic overhaul in the way it was measured to remove the more inflationary items - that's not the same as meeting the original target!

The intervention to lower rates last August was (as the OECD has disclosed) to bring about a smooth landing in the housing market. It worked, but it's never been in their remit before.* The effect of doing so so far has been to leave this island rapidly sinking into a sea of debt. Now we're starting to see the effects of that as the purse strings on the high street are being kept closed and wage inflation is a coiled spring at present.

As David Walton perhaps knew all too well, that is what is becoming the MPC strategy's true legacy.

* it does beg the question when they'll seek to intervene where next, and when ... ?

Posted by: Terry at June 23, 2006 03:44 PM

Wrong on both counts, I'm afraid. The OECD isn't in a position to disclose anything on this - but fortunately we have the Bank's own minutes. If you look back to that cut and the minutes which are freely available on the Bank's website, you'll see the cutters were concerned about the weakness of household spending, as I said, not the housing market.

As for inflation, I don't like the CPI much either, but I was talking mainly about RPIX, the previous target. It has been mainly below its old 2.5% target since 1997 and has only just crept above it.

Posted by: David Smith at June 23, 2006 04:30 PM

david walton's lone desire to raise base rate at his last MPC meeting should be a lasting testament to his economic prescience; it's an absolute tragedy that one of the brightest economic minds round the famous table should be so prematurely snatched from us.

but i agree wholeheartedly with terry's comment on housing market propping. this great socialist government decided long ago that ever-appreciating property values would keep the home-owning masses 'contented', thus their 'creative accounting' with rates.

britain's little jack horners thus sit totting up their 'wealth' whilst their poor progeny wonder if they're ever going to be able to afford a garden shed, well, before their parents snuff it, anyway. no one is ever allowed to mention the F word: fall. so we see monthly 'increases' of .001, even when we all know prices have in reality been a teeny-weeny bit, erm, down. ooh, i said it.......

i could get into our distorted inflation statistics, but what's the point; we all know how they really work. so all i'll say is, david walton was right.

Posted by: rick woollen at June 25, 2006 12:44 PM

Ah, it's a conspiracy. That must be why the Halifax has had seven monthly falls in house prices in the past two years. The house price crash school has two (at least) contradictory views. One is that there's been a conspiracy to prop up house prices, the other is that a crash has really happened but the figures have been fiddled. As for the inflation figures, I look forward to your analysis.

Posted by: David Smith at June 25, 2006 06:41 PM

must have blinked. prices fell for seven months; really? well you're the expert, but that's precipice stuff. i mentioned the F word, but i'd never dare mention the C word. it's always 'soft landing', isn't it? re: inflation. so what is it now? headline inflation? core inflation? tyre inflation? we're all katatonic while treasury boys beam. you mentioned conspiracy, not me..........

Posted by: rick woollen at June 25, 2006 09:34 PM


As well the OECD may not be in a position to disclose anything - but I think you know that I was referring to their comment on the ummm ... (*struggles not to use the word "intervention"*) enginerring of the soft landing.

Can't have it both ways, either, those drops have been recovered the following month if the lenders' statistics are to be taken seriously.

It's no good - it was intervention. I know that word rings alarm bells for the Hayek school of thought because it smacks of central planning, os euphemise it to something else if you like.

The soft landing was acheived, but the runway is short and the transport heavily laden (with debt probably but it's only a metaphor so I'll not over-extend it). What happens next? No-one knows but most of the onlookers are peering though their fingers.

Posted by: Terry at June 30, 2006 08:42 PM

And you just said that I was wrong but then showed that I was right on inflation measures.

I'll just repeat your figures:

"It has been mainly below its old 2.5% target since 1997 and has only just crept above it"

So the MPC was missing its RPIX target so it revised it and now its missing its revised CPI target which weighted more to cheap Chinese imports (ostensibly to keep the official figure down). Also, note that although its been unable to stop inflationary pressure according to either measure, its still not acting to prevent further rises.


Does anyone else sense another "inflation measurement adjustment" coming? I certainly do.

Posted by: Terry at July 1, 2006 12:40 AM

We've had a soft landing, not because anybody engineered it, but because there was no economic case for a crash.

On inflation, I'd encourage you to look at the MPC's terms of reference and its monthly minutes. In particular, the key thing about the Bank's remit is symmetry. In other words, it is as bad to be below the target as to be above it. The circumstances we are in now, a tripling of oil prices in a fairly short time, are precisely those in which inflation should not only be above target but could reasonably be expected to be above the 'letter-writing' range - 1% to 3%. Given that the Bank can't be expected to hit the target all the time with exactitude, it should be above it as often as it is below it. As I say, the Bank has erred on the downside - most of the time it has been below both the new and old targets. It is not missing the target, in fact it has done better than anybody could reasonably have expected in staying close to it.

And don't get hung up on "fiddled" figures. There's no particular bias in the CPI towards Chinese goods. And at the same tie the target was changed, it was also moved down for 2.5% to 2%. Again, its worth looking at the facts, on the ONS website.

Posted by: David Smith at July 1, 2006 10:37 AM

"no economic case for a crash", without the Bank stepping in?

That's not what the OECD report says. In fact the executive summary doesn't even speculate that the UK has acheived a soft landing at all!

I'm not going further into this. I could grab articles from other papers such as the Telegraph, Independent and FT which have had access to the full report (I'm not planning on buying it personally), and state in very bold letters that the bank "engineered" and "intervened" but I don't have the time or inclination.

You're a lone voice with the opinion that the Bank hasn't engineered the soft landing for the UK housing market. As I say, the only question is when and where such interventionism - which I think will end in tears anyway - might resurface.

Posted by: Terry at July 1, 2006 01:27 PM

Ah, you haven't read the report but you're still pronouncing it! Juts like politicians who pop up and condemn tlevision programmes having not seen them. If you did trouble to read it, you'd find it said this:

'If a relatively “soft landing” in the housing market has indeed been
achieved it owes much to the strategy of gradual pre-emptive
monetary tightening."

In other words raising rates in 2003-4. But, I repeat, that was a by-product. The MPC targets inflation, not the housing market.

Posted by: David Smith at July 1, 2006 02:49 PM

You can repeat whatever you like there's no indication that the soft lanbding was a by product of raising rates in 2003-2004!!

Everyone who has duly bought and read the report (present company excepted) interprets it as commending the engineered soft landing.

You'll have to go it alone on this one too, David.

Posted by: Terry at July 1, 2006 03:06 PM

Just ridiculous. I quote you the original document and you're still banging on. Waste of time.

Posted by: David Smith at July 1, 2006 04:51 PM

headline inflation? core inflation? tyre inflation? no, it's the chav price index! good old sunday times.....

Posted by: rick woollen at July 30, 2006 09:06 AM

today's BofE interest rate announcement has finally brought a semblance of sanity. at last the immovable object has succumbed to the irresistible force, as he always had to, but my god, it must be bad. which brings me, inexorably, to the property market. we 'conspirators' will now be watching with the greatest of interest.....

Posted by: rick woollen at August 9, 2006 05:17 PM

when and if you reflect upon the amount of time you've spent defending inflation statistics the rest of us ignoramuses have known not to reflect the true state of inflation, perhaps you'll feel you might possibly have been defending the indefensible; or has professor scase, like the rest of us, got it all wrong when he says that the CPI is meaningless because in the real world inflation is running at about 10%?

Posted by: rick woollen at August 20, 2006 06:27 AM

No, not at all. Richard Scase is an excellent futurologist but he's no expert on inflation. All this stuff about high middle-class inflation is, frankly, complete rubbish. It is almost always the case that poorer people suffer higher inflation than the better-off. As I've said repeatedly, I thought the switch to the CPI was a mistake, because few people know what it is or trust it. But the RPI has been around, in one form or another, for a century or more. It has inflation at 3.3%, which looks about right.

Posted by: David Smith at August 21, 2006 03:33 PM