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Bank's Posen Says High Cpi Not Just Due To One-Off Shocks

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http://uk.reuters.com/article/idUKTRE65T3KA20100630

Bank of England policymaker Adam Posen said on Wednesday he does not agree with the view held by Governor Mervyn King that Britain's high inflation is almost wholly caused by temporary factors.

Inflation has been significantly above the central bank's 2 percent target since December, hitting a 17-month high of 3.7 percent in April, although it eased slightly in May.

King attributes the pick-up in price pressures to changes in value-added tax, volatile oil prices and the past depreciation of sterling and says the effect will fade as slack in the economy will bear down on prices.

"The only place where I would point to or acknowledge a direct difference with the Governor is this issue of how much, looking backwards, you want to say that this was just a series of one-time shocks, where I think he has been pretty clear up to now saying that has been the case," Posen said at an economic conference in London.

"That is why we have nine members on the committee. And at some point the committee makes a decision," he told the Society of Business Economists.

In a speech earlier, Posen had said that above-target inflation had probably been due to a modest "unanchoring" of inflation expectations, but that this was not sufficient grounds to tighten policy when there were strong downward risks from fiscal austerity, especially in the euro zone.

If demand from the United States and emerging economies was enough to outweigh euro zone weakness, and inflation expectations remained above target, Posen was sure the Bank could rapidly tackle the latter problem.

"If we end up overshooting inflation because we end up happily in the good (growth) outcome, then I am very confident we can bring it back down. We know how to do that."

Household inflation expectations had only risen so far on short-term measures, and not on a five-year horizon, while financial market measures of inflation expectations did not yet show a strong rise, he added.

The budgetary tightening announced by Britain's coalition government in its June emergency budget was roughly on the scale expected, but it was too early to draw exact conclusions about its impact, Posen added.

Posen also said the central bank could restart its quantitative easing programme to purchase assets if the UK faced a deflationary shock, though he could offer no guarantee that it would prove fully effective.

"Go to the Governor's Mansion House speech, go to David Miles's speech earlier this year. Both of them express a strong conviction, with strong theoretical arguments, as to why you could continually expand QE without limit," he said.

"Speaking personally for myself alone ... I'm a little bit more humble about the capabilities of that policy. But that is moot. If that is what we have available, and the shock is deflationary, then that is what we use."

Christ the inflation is growth argument again.

It would appear that the MPC have no grasp of the basics of economics and that deflation is the natural part of the economic cycle.

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Cancer is a growth. That'd be good eh?

Never before in the field of human economics has so much shit flowed from so few mouths.

Edited by OnlyMe

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http://uk.reuters.com/article/idUKTRE65T3KA20100630

Christ the inflation is growth argument again.

It would appear that the MPC have no grasp of the basics of economics and that deflation is the natural part of the economic cycle.

Gawd 'elp us all! QE forever?! The book they must 'ave all read was called, ' How to crush a currency into oblivion in very stupid steps.'

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http://uk.reuters.com/article/idUKTRE65T3KA20100630

"If we end up overshooting inflation because we end up happily in the good (growth) outcome, then I am very confident we can bring it back down. We know how to do that."

Christ the inflation is growth argument again.

It would appear that the MPC have no grasp of the basics of economics and that deflation is the natural part of the economic cycle.

Hello Osborne

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Good job they know what they are doing.

After all they have successfully ensured financial stability since independence ensuring no bank runs or other problems.

They have identified bubbles early and prevent large scale blow ups.

They have protected jobs and the furture income generating streams of this country by ensuring all costs - not just those in the crap product index didn;t kills the companies that bring in the income.

Our trade surpluses are wonderful.

Targeting inflation 2 years out has been a roaring success, with the policy mechanisms so fine tuned never has the inflation target been missed.

Real global panic will start with the US.

http://www.themarketfinancial.com/real-global-panic-will-start-with-the-us/5430

No one seems to want to write about it, but in Weimar Germany, deflation preceded the hyper-inflation. After WWI, Germany was on the brink of economic armageddon. There was actually a world wide depression in 1920, and prices in Germany plunged. The conservative German government, in reaction to the huge debt burden of reparations, instituted severe austerity programs. This brought dire economic consequences to a country where prices and wages were already cascading. Consequently, Germany’s tax revenues had dropped dramatically at a time when it was forced to make massive payments to foreign countries in gold. This imbalance moved Germany from a state of deflation, to inflation (not yet hyperinflation).

It wasn’t long before Germany could no longer make its reparation payments. With Germany insolvent, the mark started falling off a cliff in value. When the Allies refused to take marks for debt repayment, Germany pledged it would repay the allies with its natural resources, like coal. France, which was having its own problems repaying its debt to the US, accused Germany of purposely trashing the mark and withholding payments in order to get the Allies to take less.

In January of 1923, France and Belgium sent troops to invade and occupy the Ruhr reguion of Germany. This region accounted for most of Germany’s coal mining and steel production. The German government paid the German miners and steel workers not to work for the French and Belgian occupying force. It paid them with money created out of thin air. The rest is history. The mark became worthless and inflation became hyperinflation.

US asset prices are deflating.

The US is creating money out of thin air.

The US can not pay its foreign debts.

The US is the largest debtor in the history of the world. Foreign investors and banks are taking over US companies, banks and buying up US infrastructure. In a quiet way, they are becoming an occupying force. They are in the process of exchanging their US dollars for resources. When the day comes, when the USD (backed by a $130 trillion debt) is no longer the world’s reserve currency, more foreign creditors will demand payment in something other than dollars. Guess what will happen next.

- black swan

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http://uk.reuters.com/article/idUKTRE6600EF20100701

UK inflation is "uncomfortably" high, but there is no need for an immediate hike in interest rates, Bank of England policymaker David Miles said.

"My own judgement is that we haven't yet got to the point at which a tightening in monetary policy is the right thing to do," Miles told the Daily Mail newspaper.

Miles said inflation had been particularly volatile over the last year, but the latest data suggested inflation was heading back towards the 2 percent target level.

"We were pretty substantially under the target level. We are uncomfortably above the target level now."

"The latest inflation data suggests we are slightly moving back towards the target level," he said.

Interest rates have remained at a record low of 0.5 percent since March last year, but inflation hit a 17-month high of 3.7 percent in April, contrasting with a downward trend in the U.S. and the euro zone.

Fellow Bank policymaker Andrew Sentance unexpectedly voted for a rise in interest rates last month, but Adam Posen said in a speech on Wednesday there was too big a risk the UK would return to recession for rate rises to be appropriate now.

Miles said he was more optimistic than a few months ago but warned a setback in the euro zone could still harm Britain's recovery.

"Banks throughout Europe are finding it more difficult than they might have hoped a few months ago to raise funding and they are being pushed towards shorter maturity funding -- all of which is worrisome."

"These remain real concerns and the UK -- being a very open economy, having a large banking sector -- can't isolate itself from the risks here."

Christ we really do have morons of the highest order in charge.

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  • 150 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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