King’S Credibility Crumbles

[Pent Up]

http://blogs.wsj.com/source/2010/11/16/kings-credibility-crumbles/

Is mystic merv is losing control says WSJ

Has Bank of England Governor Mervyn King recognized that his credibility is crumbling?

King wrote on Tuesday his fourth successive open letter explaining why U.K. inflation has exceeded the Bank’s 2% inflation target by more than a percentage point.

CPI inflation in October hit 3.2%, up from 3.1% the previous month.

King should be grateful he only needs to write a letter every three months. Otherwise, he’d have writer’s cramp by now. U.K. consumer price inflation has not dropped below 3% once this year and isn’t expected to next year either. Indeed, since the start of 2008, U.K. CPI inflation has exceeded 3% on average every month.

The Bank of England’s forecasts have consistently underestimated inflation, not just over the “medium term” of two years or so, but over much shorter time horizons, down to a quarter or two. This abysmal record has led King to be much more cautious about how he presents the data. The latest quarterly Inflation Report, published last week, was informative in this respect.

The report’s fan chart of inflation probabilities clearly shows that the Bank of England’s economists estimate the central probability to be for inflation to undershoot the 2% target in two years’ time, with the average expectation pegged at around 1.5%. Overall, the fan chart points to a greater than 60% probability that inflation will undershoot the Bank’s target over the medium term, with the balance of probability that it will stay below that level even three years out.

During presentations that accompanied previous Inflation Reports–which, by the way, have consistently forecast an inflation undershoot on a two-year time horizon–King was careful to emphasize the downside risks to prices.

He didn’t last time.

In fact, and directly contradicting the message in the chart, he emphasized that the two-year risk for inflation is now evenly balanced. In other words 50-50 rather than 60-plus/40-minus.

More at the link.

[Misanthrope]

Putting aside the credibility of official statistics, for the time being, the Fed has a modicum of excuse when it comes to touting the deflationary threat, After all CPI, yesterday was only 0.2%. Core was zero yoy.

But the BoE clearly doesn't have the same luxury. So using this as an excuse for the 'rock and hard place' monetary stance hasn't only worn thin, but it's now obselete. It's become obvious that the BoE is gunning for inflation, but needs to vindicate it in any way that mitigates a need to raise rates. They've chosen their old fashioned path and are wedded to it. Unfortunately for them (and they're well aware of it) external forces will have a lot more impact on The UK's fortunes than can be mustered from within.

Sitting ducks hoping that they can get away with it - by not taking a bullet.

[OnlyMe]

He's lying and he knows he's lying. He thinks he's lying for the good of the country.

Waiting for a 911 type event to blame the resultant depression on.

Rather than people looking at previous years of monetary policy idiocy as the reason for the dire financial and economic state this ountry has been put it. Just keep the plates spinning long enough and people looking the other way.

[Tonkers]

Waiting for a 911 type event to blame the resultant depression on.

Rather than people looking at previous years of monetary policy idiocy as the reason for the dire financial and economic state this ountry has been put it. Just keep the plates spinning long enough and people looking the other way.

Oi! We've never had it so good!

[Democorruptcy]

I wish people would use the full name BOTFSIE, instead of just BOE

[Pole]

He's lying and he knows he's lying. He thinks he's lying for the good of the country.

...for the good of the country???

what country? England, Scotland or maybe the whole Britain??

He's a declared globalist and those guys only care about the global banks, and how to help the banks steal more money from countries.

[AvidFan]

Oi! We've never had it so good!

Beat me to it:

http://www.telegraph.co.uk/news/newstopics/politics/conservative/8144803/Lord-Young-profoundly-apologises-for-never-had-it-so-good-comments.html

Worth a listen, if not a thread on it's own...

Edited November 19, 2010 by AvidFan

[easy2012]

http://blogs.wsj.com/source/2010/11/16/kings-credibility-crumbles/

Is mystic merv is losing control says WSJ

More at the link.

King/BoE position is that eventually inflation will moderate. If he has done none of those QE things, deflation of house prices will eventually moderate as well.

Basically, BoE wants inflation and that is the only trick a central bank has.

[interestrateripoff]

Mystic Merv and Credibility simply doesn't go together.

[Sledgehead]

Merv should have constructed a fan chart of "people tumbling me" against time.

[billybong]

Should in a year’s time the BOE’s forecasts continue to be undershooting actual inflation as much as they have done hitherto, the market’s confidence in King and his colleagues will evaporate very quickly. The solution then won’t just be a very large and very rapid tightening of policy. It will be to replace King with someone whose reputation isn’t riddled full of holes.

It's laughable the way they try to present him (and the BoE as well) as still having any credibility left to "crumble" or to "evaporate".

Edited November 19, 2010 by billybong

[Reck B]

mmmm, crumble.

[mrpleasant]

King's credibility died shortly after he left the lectern following his 'moral hazard' speech and went to straight to the big button marked 'Print £'.

[Harry Sacks]

Is this a breakfast cereal?

[AvidFan]

His best friend Mr. Ben says we shouldn't call money printing "Quantitative Easing"

http://www.bloomberg.com/avp/avp.asxx?clip=mms://media2.bloomberg.com/cache/vk5UueyaWynw.asf&vCat=/av&RND=768955411&A=

[Meat Puppet]

Well - we all know there is much truth in it.

Policy has been all about picking winners and losers - not solving the fundamental problems.

To pretend that mortgage borrowers have not had a great recession on the whole is BBC political correctness gone mad.

Ever since the first agricultural surpluses about 10,000 years ago it has been this. Sometimes events overtake the policy makers - that's all we can hope for now.

[billybong]

His best friend Mr. Ben says we shouldn't call money printing "Quantitative Easing"

http://www.bloomberg.com/avp/avp.asxx?clip=mms://media2.bloomberg.com/cache/vk5UueyaWynw.asf&vCat=/av&RND=768955411&A=

They've been generally rumbled on the expression the Quantitative Easing. Everyone knows now that it's equivalent to the Money Printing.

So it looks like they're going to try to disguise and camouflage it again by calling it something like the Asset Purchases.

That'll be so rumbled and then there'll be another speech to say they shouldn't be calling it the Asset Purchases.

Edited November 20, 2010 by billybong