>> I suspect Liz Truss is far from stupid - you don't get to Oxford Uni
>> from a state school if you are thick. She studied PPE so it seems unlikely
>> she lacks a grasp of basic economics.
PPE is the generalist degree that is supposed to improve their minds, not their knowledge. It doesn't make a technical expert. As you say, basic. But I suppose it could explain why she rejects conventional economics advice and wants to try her own ideas - a touch of Dunning-Kruger?
>> far from stupid
In the everyday sense, maybe. But we all know one or two who confound the theory. Oxbridge selection interviews are supposed to test thinking ability, but that's why candidates are coached by good teachers with ambitions for their pupils and who know the system.
And politicians are something else. Like journalists and lawyers (nothing personal) they tend not to be really comfortable with numbers. Bit of a generalisation, not to be applied to an individual, but I'm fairly confident with it!
Take the 50 year mortgage idea, as a method of improving affordability.
A £300,000 25 year mortgage at 5% p.a. is £1734 a month. 50 years at 6% (a reasonable assumption that the rate will be higher) is £1544 per month.
Most of the monthly payment in the early years is interest so the monthly payments really aren't as different as I suspect Boris Johnson imagines. Or maybe he knows, and he's just creating opportunities for his donors?
The total interest on the first example is £220k, on the 50 year example it's £626k. And of course this future value can be monetised immediately should the lender wish it.
If the improvement in "affordability" were to push up house prices by say 10%, which if the number of potential buyers at every price level were to increase seems quite possible (equilibrium is 12.3%), then the monthly payments on the 50 year loan on £330,000 would only be about £20 a month lower than the 25 year one on 300,000 - but would go on for twice as long.
Is the Oxford genius Johnson just scheming, or innumerate?
In their favour I don't think either of Truss or Sunak has actually endorsed this brainwave of Johnson's yet. I suspect Sunak has figured it out and is desperately hoping Truss will use it so he can rubbish it.
Last edited by: Manatee on Fri 19 Aug 22 at 19:51
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