Saturday, Aug 14, 2010
''the Bank of England is NOT actually making forecasts but pumping out economic propaganda''
Marketoracle.co.uk: The Real Reason for Bank of England's Worthless CPI Inflation Forecasts
''...the Bank of England DOES NOT actually forecast where the economy or inflation will be in the future. What the Bank of England is actually doing is to state where the BOE would like the Economy and Inflation to be in the future and then slaps the forecast label on the top...the Bank of England is NOT actually making forecasts but pumping out economic propaganda with the primary aim of reassuring the public that a. the BOE is in control of inflation when it is not, and b. that a strong UK economy is the default norm regardless of what is actually transpiring''
MERVYN KING MUST GO NOW!!!!!
Posted by hpwatcher @ 10:39 AM (1577 views) Add Comment
12 Comments
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1. techieman said...
Actually a bit confused by all this stuff about Merv the swerve. Am not fan myself, but really does anyone think the person "in charge" at the BoE makes a difference to the policy? Surely if - as most people on here think - the BoE is not independent then what difference what it make to change the bloke at the top?
So if he is a patsy and he gets the bullet wont they just introduce another patsy? Not actually being argumentative - just wondered what the view is. Personally im not really bothered whos in charge at the BoE - but clearly some people are.
2. paul said...
I think the problem is that Merv was the captain who kept the nose pointing upward and now that we've stalled, the finger needs to be pointed at someone.
We got rid of most of the architects of the credit boom, but not the really obvious one.
This article does demonstrate that there nees to be a root and branch rethink of what the Bank of England does and why it persistently underestimates inflation. Personally, I've said this for a long time - the consistent underestimation is not an estimation at all but a flag of convenience for divisive policy decisions (mostly to lower rates).
As Walayat says:
"Therefore politically it is much better for the Bank of England to be surprised by persistent high inflation then to forecast high inflation that implies that it is unable to do its job in controlling inflation which is the banks primary objective."
3. uncle tom said...
This is a rather silly rant.
CPI has run toward the top of the BoE's fan graphs, but it hasn't gone off the scale. The BoE put too much weight on the deflationary effect of excess capacity in the economy, and may have relied too much on the Japanese experiance when trying to assess the impact of that factor.
So inflation is higher than they expected, because excess capacity is not having the effect they expected. But one has to forgive that error, as there is not enough historical data from the UK to argue convincingly that they were going 'off piste'.
From recent minutes and speeches, it is clear that Merv & co. recognise and acknowledge this deviation from expectations, and they currently appear unsure as to whether this is a delayed effect, or one that is not going to materialise.
I tend toward the second option, as the UK is not a country where the workforce readily accepts wage cuts. In past downturns there have been wage freezes against a backdrop of high inflation, so wages have fallen in real terms; but that is psychologically very different to seeing your actual wages fall, against a backdrop of low inflation.
So live and learn Mr King - if you continue to cling to the mast of excess capacity too fervently, then there will be a case to answer...
4. paul said...
UT, if you look at the stats then actually there is nothing irrational about this rant at all.
The Bank of England consistently and quite deliberately underpriced credit and now that the headache after the party has come, they want the neighbours to come and clean up.
The Bank's remit is for an *upper* limit of three percent. And the Bank is now continuing to ignore its primary remit order to try to inflate away the debts of the reckless and criminally fraudulent. It has underestimated inflation over 90% of the time in the last four years. That's not coincidence. That's simply unacceptable.
Remember the Bank of England's primary remit is to control inflation, its secondary remit is to maintain price stability. Stop and think about that.
Has it done a good job in recent years on either counts?
5. uncle tom said...
Paul,
I have thought about it, and I doubt there is any cover-up or conspiracy at the BoE.
Yes, their estimate of inflation has had a recent tendency to run low, but there is a perfectly rational reason for that, as I detailed above.
If they don't correct their model in the light of recent experiance, then we certainly have cause to take issue; but the unique circumstances that have prevailed over the last three years make it unfair to breathe fire right now.
The BoE and MPC are not superhuman..
6. mark wadsworth said...
Fair points all.
The BoE was never 'independent' of politicians in any way shape or form, and they are indeed just churning out reassuring noises/propaganda and doing their best to keep the Home-Owner-Ist party going, i.e. exactly what they have been doing since 1997. The circumstances may have changed (due to the bubble they helped create popping, of course), but their mission remains the same.
7. paul said...
UT
Doing your job is not superhuman. Especially if you've made your job difficult by not paying attention 90% of the time in the last four years.
8. paul said...
Just to be clear too - Mervyn King has been actively talking the pound down in value in recent years - actively creating import inflation.
But not doing your job and not sabotaging your job requires superhuman effort, rrright?
9. Stevie Dee said...
In roulette like any rigged market, the house supposedly always wins. This imo is wrong, as the structure or paradigm is open to astrological forces. This isn't ideology, this is simply the way it is, nature. Simple! So listening to a statician is ineffect listening to a lucky gambler, CHANCE! In short it's bo!!ocks!
10. mr g said...
"The alternative view is that the several hundred economists and analysts the BoE employs are totally useless.."
Along with all the other so called "experts" in the financial sector who are overpaid, underachievers.
11. Wickedw said...
I agree with Paul here, What productive job allows you get it wrong 90%+ of the time and still think you are adding value? Wonder how they'd get on with bomb disposal?
The BOEs remit seems to simply be to do whatever serves the underlying banking / related sector not the overall welfare of the country.
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