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Ashley Seager: Blanchflower's departure is a worry

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  • Ashley Seager: Blanchflower's departure is a worry


    In the end it is no surprise that Danny Blanchflower will leave the monetary policy committee next May when his three-year term is up. But it is a worry.
    He has always made clear that he would only do three years, but the last 12 months of trying to get his colleagues on the MPC to see just how bad things were getting in the economy has clearly been exhausting.
    He constantly found himself having to give speeches and newspaper interviews to get his point out, because his arguments, until very recently, fell on the deaf ears of his colleagues on the MPC. He told the Guardian in January that his colleagues were "fiddling while Rome burns" and voted at every meeting this year to cut rates while his colleagues preferred to leave them unchanged or even wanted to raise them.
    That can't be much fun, and another three years of it would not be most people's idea of a good time, especially as Blanchflower has to travel each month from Dartmouth College, New Hampshire, to London.
    There is also an element of quitting while you are ahead. In a sense, Blanchflower's work is done. In the past two months the committee have made huge reductions in interest rates, from 5% to 2% - the lowest since 1951 and the joint lowest ever. In all likelihood by the time Blanchflower goes, rates will be at 1% or even zero.
    He feels bad that rates were cut so late and that much damage will have been done to the economy by the delay but that is in the past and staying on beyond May would not change that.
    His departure may mean that the first rise in interest rates will come quicker than it might otherwise have done. But that is unknowable.
    In any case Blanchflower has never been a rate dove for the sake of it. He has been a dove over the past year and more because he saw earlier than almost everyone the damage that the turning off of the credit tap to the economy and the bursting of the house price bubble in autumn of 2007 would do to the economy.
    If he did stay on beyond May and saw wage growth accelerating in, say, 2010, he would be the first voting to hike interest rates.
    And it is unlikely that some MPC members, including governor Mervyn King, will be sorry to see Blanchflower go, given that he has all given them a crash course in how to run monetary policy properly.
    The Treasury, though, will be sad to see him leave. Officials there have watched helplessly this year as Blanchflower has tried to cajole his colleagues into cutting rates - something the Treasury was desperate to see happen. They were hoping he would stay but in the end knew his mind was made up.
    But it is Blanchflower who will have the last laugh. He will concentrate not only on teaching economics at Dartmouth but researching his other favourite topic on which he is an academic authority - happiness.




    guardian.co.uk © Guardian News & Media Limited 2008 | Use of this content is subject to our Terms & Conditions | More Feeds

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