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Welcome to Fathom Financial Consulting

A new kind of economic and financial consultancy

Fathom is a new kind of economic and financial market consultancy. Independent, demand-driven and rigorous, Fathom brings macroeconomic analysis together with financial market research.

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Listen to Danny Gabay being interviewed on the Today Programme about Fathom's Plan to 'help solve the recession'

 Directors interview, today programme, 25 Feb 09 

transcript

Published Research

What's New at Fathom, your economic consultancy?

On June 23rd, DeAnne Julius, Senior Adviser to Fathom wrote a comment piece which appears in the Financial Times, urging radical overhaul of the Monetary Policy Committee.  The full article can be found here.

Other news:  Fathom's Monetary Policy Forum, May 8 2009

Speaking at the second Monetary Policy Forum on May 8, held at CASS Business School, former MPC members Dr. DeAnne Julius, Prof. Charles Goodhart and Dr. Sushil Wadhwani respond with an assessment of the outlook for the public finances and how that will impact on the Bank of Englands options, ahead of its May Inflation Report. The MPF discussed whether the much hoped for green shoots are real, or illusory. It also discussed the efficacy of the Bank of Englands Quantitative easing program to date. But its main focus was the UKs dire fiscal position. Many governments now face substantial debt problems, and in most cases the situation can be expected to improve once the recovery starts in earnest.

Dr. DeAnne Julius, Senior Adviser at Fathom Financial Consulting, and founding member of the MPC between 1997 and 2001, said: The budgetary path the UK is now on is not sustainable and the government's policy of raising taxes on the wealthy and cutting out 'waste' is not credible as a solution. A more compelling plan for restoring the nations finances to balance is needed. Failure to put one in place risks saddling the nascent recovery with a very heavy burden of debt, and possibly unacceptably high inflation.

Charles Goodhart, also a former MPC member, and member of the MPF panel said "Exiting QE is as easy as falling off a log, but fiscal policy cant be turned around that easily.

Sushil Wadhwani, another former MPC member on the panel, said he was skeptical that quantitative easing would be effective, regardless of its scale.

Danny Gabay, Director at Fathom Financial Consulting, said: The UK Government faces a daunting challenge in financing this level of debt. In the absence of a fiscal tightening of at least 10 per cent of GDP, ; the UK government may have no choice but to turn to inflation. But if investors begin to suspect that the government is not really committed to a credible repayment path, they will begin to anticipate inflation and hence charge a higher risk premium or interest rate on current and future debt. That will further undermine sterling and drive up borrowing costs. It would only take a modest increase in debt servicing rates to 7% in nominal terms, to take interest payments as a share of GDP to their highest since WW2.

Using our Bank of England Simulation Tool (BEST), we have carried out a thought experiment: in the absence of a credible discretionary fiscal tightening, what level of inflation would be needed over the next 5-10 years in order to stabilise the net debt to GDP ratio? The answer turns out to be 10%.

The credit crunch has exposed the UKs lack of bold, fresh thinking in the monetary policy arena. Our new Monetary Policy Forum will bring together an unrivalled depth of experience and allows the open exchange of views, ideas and research relating to the effective conduct of UK monetary policy. Its discussions will provide a much needed balance to the UK economic establishment.

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