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Why the state support of a mortgage in the UK led to an additional increase in consumption, what is the correct answer to any question of economic policy and how transfers of football players affect the price of oil: the main thing in the blogs of economists.

The article was first published on the ECCON website.

The macroeconomic effects of state support for mortgages are not limited to the housing market, write Economists of England Bank on Bank Underground Blog about their new a study in which the results of the British government program were analyzed Help To Buy For 2014–2016 It has greatly simplified the conditions for the acquisition of housing on credit, in particular, by reducing the initial contribution to 5% from the usual 10% of the UK for most mortgage programs. Thanks to state support for the study period of housing purchases, almost 11% increased, and aggregate consumer demand in the regions where participation in the program was most active increased by 5%.

When changing the ratio of the loan amount to the cost of pledges (loan-to-value, LTV) from 90% to 95%, the size of the credit shoulder, which the borrower can claim with the same contribution, doubles: so, with the initial contribution of 10,000 pounds, the family can buy housing for £ 100,000 and for 200,000 pounds at LTV-at LTV-at LTV 95%. Moreover, as a rule, for borrowers who are especially difficult to accumulate for the first fee, the requirements for it are the most strict, economists write. Their analysis showed that about 90% of the program participants amounted to young families, 78% bought housing for the first time. The demand was geographically uneven and concentrated in areas with the infrastructure necessary for young (schools, parks, pubs, etc.), primarily in London, where housing prices increased by almost 5%, in other regions with high popularity, HELP to Buy increases, a little more than 1%.

In regions with active demand for mortgage state support, general consumer demand has also increased - partly this is explained by purchases of goods for the purchased house, but not only: for example, purchases of cars increased by 4%. The weakening of the requirements for the initial mortgage contribution has released funds that no longer had to be postponed to the purchase of housing and which were aimed at consumer expenses, the authors of the study conclude: thus, measures to reduce the limitations in the mortgage market affect the housing market, but may also have significant macroeconomic effects.

The growth of inflation in the United States itself is not a problem - the danger will arise if the Federal Reserve confuses the policy of politics for its purpose, Reasoning Scott Sumner from the University of George Mason in the Econlib blog post. In April, inflation in the United States increased by 0.8% month by a month and 4.2% by April 2020, putting it right away Several records. Last year, the Fed has announced that she was moving to guideline to the medium -term inflation level - This means that the inflation periods below 2% can be compensated by periods when it is above 2%, and vice versa. The fact that inflation for some time will be higher than 2%, not a reason for anxiety, thinks Sumner-it is caused by fears that the Fed will not adjust its policy tools, taking into account changing economic conditions: the Fed must always establish these tools (for example, the rate of federal funds) so as to achieve the goals of politics (for example, infection of 2%), that is, to adjust the tools every time the economy is provided stronger or weaker than expected, in order to maintain the path of expected growth. But now the situation may change, Sumner is worried.

In 2015, the Fed did not increase interest rates because of the goals of politics, but due to the fact that for some reason the low rates considered undesirable, Sumner recalls. Today there may be the opposite option: the Fed can be considered low interest rates as an end in itself, and not as a means of achieving the average in the 2020s. Inflation of 2% and not increase them, even if it requires macroeconomic conditions, an economist is worried. Politics can go off the course if the central banks confuse the tool for the purpose. So far, the profitability of bonds remain low, that is, the markets do not see the risk of overheating. And the surge of inflation is probably short -term, but for the first time in a decade, the balance of inflation risks has shifted from the risk of its reassessment to the risk of its underestimation, Sumner believes.

Beware of economists who adhere to political paradigms: any ideology has blind spots, overshadowing the path to understanding how the economy works, warns In the Project Syndicate column, Dani Rodrik, one of the leading world political economists. US President Joe Biden called for the growth of state -owners to social programs, infrastructure and the transition to the green economy, intending to use public procurements to restore internal supply chains and transfer of workplaces in industry back to the United States, its Finance Minister Janet Yellen insists on a global coordinated increase in corporate taxes, and Jerome Paell, the head of the Fed “The institution, usually strictly adhering to price stability,” supports fiscal expansion and dispels the fears of inflation: all this, Rodrik lists, is a departure from the dominated since the 1980s. Ideas that were called Washington consensus, market fundamentalism, neoliberalism and which were developed because of the previous failures of excessive state regulation. But the economy is not a song to free markets, writes Rodrik.

Markets with perfect competition, harmoniously creating a stable balance, is only one possible option of many, however, the spread of such an idea as universal formed an unstable and excessively dependent on the financial sector by the economy with high inequality, unable to cope with such challenges as climate change, social disintegration and technological revolution, Rodrik said: “Invisible hand:“ The invisible hand The market ”by Adam Smith is the idea that self -loving people, in order to enrich their own enrichment, simultaneously contribute to general prosperity, is a pearl in the crown of any economist, but deeply contradicts intuition. Perhaps it would be worth starting with the basics of teaching the economy free of ideology - there is already such a project, Rodrik is recommended open and free The Core course, compiled by economists from different countries of the world, and will merit to the replacement of traditional economic approaches by a more realistic alternative. For example, that people are not selfish and far -sighted, but proxial and short -sighted ones; Or that competition with her “winner receives everything” is more imperfect than ideal. This approach would lead to a better understanding of the social consequences of economic decisions, but not to create a new paradigm-and this is good: all the previous ones, whether Keynesianism, social democracy or neoliberalism, have blind spots.

The correct answer of the economist to any question in the field of economic policy - “it depends on the circumstances”, is sure Rodrik: there is time for fiscal expansion and for budget savings; There is a time when taxes should be high and when low; There is a time when the government should interfere in the supply chains and when should provide the markets with complete freedom of action. The Biden administration began a bold and long -ripened transformation, but her goal should not be in creating a new orthodox, but to learn how to adapt politics and institutions to changing needs, Rodrik concludes.

Transfer of football players to clubs financed by oil magnates are accompanied by short -term growth in oil prices, Tyler Cowen from the University of George Mason shares with a link to study In the May issue of Energy Economics. Its authors, economists from Australia, New Zealand and Vietnam, compared the transfers of the players of five football clubs belonging to Qatar, the UAE and Russia, for 2003–2019. With the dynamics of Brent oil trading. Economists counted more than 300 transitions of football players to these clubs and more than 200 - from these clubs to others. The average price of the player’s “purchase” amounted to 14.86 million pounds, “sales” were 9 million pounds, and the gap between the most expensive acquisition and the most profitable “sale” was more than three times (199.8 million and 59.4 million pounds, respectively). Since the acquisitions are generally more expensive, the football club in the transfer market has a shortage, and for its financing, club owners can detain or reduce oil supplies, which during periods of such a shortage leads to a short-term (within four to five days) increase in the price of a spot market (the market of physical supplies), in turn, increasing the prices of the oilfield fits. Authors.

According to their calculations, on average, each 1 million pounds of the necessary financing increases the sport prices by 0.014% or, taking into account the average daily oil purchases, costs its customers to an additional $ 0.9 million per day. Only super -expensive transactions do not affect futures that require more than 70 million pounds and attract wide attention of the media, which probably makes investors think about the influence of a transfer on the oil market - during such periods it affects the increase in the volume of cars of futures, dispersing the effect of influence on their profitability. The question arises - if the owners of “oil” football clubs can so easily raise the price of oil, then why they do not constantly do this, the authors are thinking and they themselves answer: probably, none of them have sufficient market power or, most likely, such actions are not at all a thoughtful strategy for maximizing profits, and is spontaneously when the manager offers the possibility of acquiring a cool player.

How transfers of football players affect oil prices