Evidence of continuing strength in the housing market poses a problem for the Bank of England's Monetary Policy Committee this week.
There is concern in the sense that this divergent economy poses a problem for the policy makers, namely the Monetary Policy Committee at the Bank of England.
The problem here is that monetary policy is a very blunt instrument.
If, after the Christmas break, the interbank market still stutters, central banks will continue to have a problem transmitting their monetary-policy message to the market.
The big problem is that economics and monetary policy is quite complex and much beyond the understanding of the average person.
The problem is that Ben Bernanke may be steering monetary policy over a cliff.
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Given his statements that gold is an obsolete, if not destructive, guide to monetary policy, Bernanke is not likely to recognize the inflation problem until it hits him--and the economy--square in the face.
The problem, of course, comes when easy monetary policy fails to fuel an economic recovery, which appears to be the ongoing case in Europe and could be heading toward a similar fate in the U.S. if the much-feared fiscal cliff causes a significant decline in already-tepid growth.
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So, there really is no problem with raising rates, tightening monetary policy, slowing the economy, reducing inflation, at the appropriate time.
The biggest problem at the moment for the sector is inflation and a tight monetary policy that is restricting lending.
President Bush exacerbated the problem, further pumping up the housing bubble with his cheap dollar monetary policy, under the illogical, outdated, Keynesian thinking that a cheap dollar expands the economy by promoting exports.
Major mistakes in monetary policy have already been made, and continued stubbornness at the top of the Fed will merely exacerbate the problem.
Germany has a problem, just as all the EU does and that is their currency is not linked to their monetary policy of the governing countries.
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