Merv Goes "yes Minister" In Latest Statement

[Realistbear]

http://uk.finance.yahoo.com/news/highlights-bank-august-inflation-report-press-conference-reuters_molt-a330bdaa86e7.html?x=0

Highlights - Bank August Inflation Report press conference

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10:51, Wednesday 11 August 2010

LONDON (Reuters) - The Bank of England delivered its latest quarterly inflation and growth forecasts on Wednesday.

Below are highlights from the news conference with Governor Mervyn King and other policymakers.

KING ON FED'S DECISION

"I think the policy measures they (the U.S. Federal Reserve) announced yesterday were ones that were much more designed to maintain the stance of policy to avoid an inadvertent tightening of policy.

"I interpret that as largely being to try to maintain the relatively easy stance of policy they've adopted."

KING ON EXPORTS

"The trade data are more likely to affect the composition of demand rather than any judgement the ONS will reach about the actual path of output, but it's encouraging that the path of exports appears to be somewhat closer to the more optimistic surveys."

KING'S OPENING STATEMENT

"It will take many years before bank balance sheets and fiscal positions return to anything like normal. In the meantime they will act as headwinds to recovery."

"The overall outlook for inflation further out is little changed from May. As the temporary effects from inflation drop out of the comparison, downward pressure from the persistent margin of spare capacity is likely to push inflation down over the period. There are significant risks, though these are likely to be weighted to the upside."

[GordonBrownSpentMyFuture]

He doesn't half talk some sh!t.

[AvidFan]

He doesn't half talk some sh!t.

So did Alan Greenspan.

[Minos]

He doesn't half talk some sh!t.

You should be a journalist.

[OnlyMe]

Trade deficit is £7.5 billion ish, talking out of his **** as usual, there has been no mstatistically material improvement to reflect the trashing of sterling. Understands nothing about the dagae his and his precedecessors have done to the real economy. A finance flunky, manipulating his way to a fat pension and that sums hm up.

[scappers]

I don't like how he says that the 'blip' in inflation will work its way out of the numbers so can be ignored. So a few months of 100% inflation can be ignored as in a years time inflation will be flat again. I want to know in what circumstances he DOES care about inflation ? "None" I guess.

[OnlyMe]

As the temporary effects from inflation drop out of the comparison, downward pressure from the persistent margin of spare capacity is likely to push inflation down over the period. There are significant risks, though these are likely to be weighted to the upside."

Each month that a higher than expected number drops out of the figures is a result for us, this means over time we can conitnually li to the public about our remit and our ability. That is until somebody bothers to look back over the figures.

[OnlyMe]

I don't like how he says that the 'blip' in inflation will work its way out of the numbers so can be ignored. So a few months of 100% inflation can be ignored as in a years time inflation will be flat again. I want to know in what circumstances he DOES care about inflation ? "None" I guess.

It doesn;t, unless people realise what is going on and they ask for higher wages as a result - if they keep wages down they feel they have controlled inflation. It shows how little they know about the finances of indivudals as eventually this is a recipe for disaster and permant reduction in living standards and ability to invest and grow out the problems mainly ofr their making. Also explains why they ignored house inflation - they really only think wage inflation matters.

[Panda]

Merv is starting to look like a fool, well starting......he looks like an idiot who in short is telling porkies.......

The Corrupt of England only worry about wage inflation, as long as we all settle for next to no wage increments then interest rates will remain low for as long as we all work longer for less. But, and i say but, as soon as wage inflation shows its ugly head, you watch interest rates go up to match in sync.

This is why cash will match inflation, not you average cost but it will stay with, and if you are clever, with monitoring your rate of return and a 20% tax payer your stash will easily stay with or maybe grow above wage inflation. It has done for the past twenty five years.

But wage inflation will be no where near cost inflation.so house prices will stall in the long term, but Merv will just sit and wait like a big croc, watching for any signs of wages moving up, once they do, rates will move aswell.

But why we all work longer and harder for the same or less, then you can sleep well at night knowing your debt will linger for longer and rates will remain negative to cost inflation, but positive to wage inflation...................

[lowrentyieldmakessense(honest!)]

they really only think wage inflation matters.

if you are aiming for a global levelling yep

[OnlyMe]

if you are aiming for a global levelling yep

You don't get levelled if your costs don't go down, you get flattened.

Edited August 11, 2010 by OnlyMe

[Panda]

if you are aiming for a global levelling yep

Agreed, that is the point, we have to settle for the same living standards as PingWee in China....................Eventually, this is why the hyperinflationists are so wrong.......Maybe costs will soar, but no way will wages.

[exiges]

The best trick Mervyn is accomplishing is to look like an idiot, when in fact he knows precisely what he's doing, inflating the problem away.

[lowrentyieldmakessense(honest!)]

Agreed, that is the point, we have to settle for the same living standards as PingWee in China....................Eventually, this is why the hyperinflationists are so wrong.......Maybe costs will soar, but no way will wages.

hyperinflation happens when confidence in the con game ends

[davidhpc]

totally full of sh1t, that man is.

[Bloo Loo]

the important truth he has outed is that Banks balance sheets are nowhere near normal, that they are a headwind to the economy (bailouts, lack of lending and high cost of debt), but that they are going to improve in the medium term.

This was the ONLY cure when they failed in 2007...trade through the problems.

they (Central banks) have manged to add time to allow the healing...what they havent allowed is the trashing of banking excess capacity. Until they do, and we see many bankers on the JSA, then they will continue to be a carbuncle on the face recovery.

[Traktion]

Agreed, that is the point, we have to settle for the same living standards as PingWee in China....................Eventually, this is why the hyperinflationists are so wrong.......Maybe costs will soar, but no way will wages.

Hyperinflation has nothing to do with wages or more borrowing. Hyperinflation occurs when people lose confidence in the currency and start trying to rid themselves of it.

Using the Quantity of Money theory, M V_T = P_T T, when people lose confidence in money, velocity (V) picks right up (as people bail out), triggering price rises (P). The more P increases, the more likely people are to lose confidence in the money, stoking V further. Rinse and repeat until currency repudiation.

High inflation could be the trigger, as could a sell off in Sterling... a whole range of things could spook savers. Mervyn and his gang need to demonstrate that everything is under control, so that savers think everything will be fine. The moment they lose faith, uber high interest rates will be the only thing that could reverse the tide.

Remember, with state backed, fractional reserve banking, essentially* there are as much 'savings' as there is debt. Those savings may get spent rapidly, should circumstances spook the holders.

* As we have state guarantees and banks which are too big to fail, bank liabilities will be printed up as needed.

Edited August 11, 2010 by Traktion

[Dorkins]

The best trick Mervyn is accomplishing is to look like an idiot, when in fact he knows precisely what he's doing, inflating the problem away.

Is it working? Seems to me we are actually going deeper into debt relative to wages and tax revenues. Oops!

[Panda]

hyperinflation happens when confidence in the con game ends

Hyperinflation, loss of confidence..............nope, maybe a teeter towards but not a fully hyperinflation, loss of confidence scenario, and i tell you why, they will just jack up interest rates faster than we thought possible to offset any loss of confidence, and this i feel is the end game for them should circumstances prevail..

I see this scenario, but when, why we buy US bonds, they buy our bonds, we buy our bonds, they buy there bonds, theres no bonds left for anyone else..........

[OnlyMe]

Is it working? Seems to me we are actually going deeper into debt relative to wages and tax revenues. Oops!

It is working if you want to bankrupt as many people in the popualtion as possible whilst propping up the real culprits.

[Traktion]

Hyperinflation, loss of confidence..............nope, maybe a teeter towards but not a fully hyperinflation, loss of confidence scenario, and i tell you why, they will just jack up interest rates faster than we thought possible to offset any loss of confidence, and this i feel is the end game for them should circumstances prevail..

I see this scenario, but when, why we buy US bonds, they buy our bonds, we buy our bonds, they buy there bonds, theres no bonds left for anyone else..........

And how high would they have to go? Take a look here: http://news.bbc.co.uk/1/hi/business/7818717.stm#chart

The last two times the pound has had to be defended (or inflation neutralising), they went over 15%. Considering the stimulus this time around is unprecedented in the UK, how high do you think they would have to go this time?

Let's say they 'only' go up to 15%. Imagine the number of defaults and bankruptcies there would be. In a recent post, even 5% was looking vicious, but at 15% it would be a blood bath... full on depression stuff. Do you think they will have the option to 'just' jack up interest rates?

If there is a loss of confidence, the BoE may be caught between a rock and a hard place - hyperinflation or depression. This isn't a good choice.

[Panda]

And how high would they have to go? Take a look here: http://news.bbc.co.uk/1/hi/business/7818717.stm#chart

The last two times the pound has had to be defended (or inflation neutralising), they went over 15%. Considering the stimulus this time around is unprecedented in the UK, how high do you think they would have to go this time?

Let's say they 'only' go up to 15%. Imagine the number of defaults and bankruptcies there would be. In a recent post, even 5% was looking vicious, but at 15% it would be a blood bath... full on depression stuff. Do you think they will have the option to 'just' jack up interest rates?

If there is a loss of confidence, the BoE may be caught between a rock and a hard place - hyperinflation or depression. This isn't a good choice.

In my opinion....................

On a global scale, nowhere near 15% to defend sterling, currently in todays climate 6% would do the job, they no it, i know it, its why they play with numbers, play with inflation. 6% would be where the base rate should be anyway considering inflation figures........................................

They can do what they want, manipulate all they want, they have leeway upwards with rates, whereas downwards, can't go any lower, we are in negative territory.

Regarding rock and hard place, we are, well Merv is there, don't get no worse than where we are, bankrupt busted banks, falling standards of living, falling wages, falling savings, rising unemployment, falling house prices, just a sense that we are getting poorer, why because we have run the course of credit inflation, now we embark on credit deflation, coupled with cost inflation, coupled the threat of higher interest rates should confidence in our currency drop out the sky.

Not nice, but this is what they planned all along, they knew what was happening, middle England will just have to cough up...................

[Traktion]

In my opinion....................

On a global scale, nowhere near 15% to defend sterling, currently in todays climate 6% would do the job, they no it, i know it, its why they play with numbers, play with inflation. 6% would be where the base rate should be anyway considering inflation figures........................................

They can do what they want, manipulate all they want, they have leeway upwards with rates, whereas downwards, can't go any lower, we are in negative territory.

Regarding rock and hard place, we are, well Merv is there, don't get no worse than where we are, bankrupt busted banks, falling standards of living, falling wages, falling savings, rising unemployment, falling house prices, just a sense that we are getting poorer, why because we have run the course of credit inflation, now we embark on credit deflation, coupled with cost inflation, coupled the threat of higher interest rates should confidence in our currency drop out the sky.

Not nice, but this is what they planned all along, they knew what was happening, middle England will just have to cough up...................

While 6% may be where rates should be now, if you're trying to combat a currency collapse, you may need to go much further. If inflation starts to head 10% and beyond (easily within the bounds of reality), I doubt a 6% interest rate carrot is going to convince you to keep your money in Sterling.

I agree with your sentiment of where we are though.

Edited August 11, 2010 by Traktion