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Bank Of England Split Deepens As Adam Posen Downplays Inflation Threat

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http://www.guardian.co.uk/business/2011/feb/25/bank-of-england-split-adam-posen-downplays-inflation-threat

The row on the Bank of England's monetary policy committee intensified on Friday, with member Adam Posen saying he was not worried about inflation in the UK because wage growth is set to stay low for the next two years.

His comments came less than 24 hours after interest rate hawk Andrew Sentance set out 10 reasons why borrowing costs should rise.

Posen, who still backed an extension of the Bank's quantitative easing programme at this month's meeting, said he did not expect high inflation to persist. Asked if inflation would remain high for a long time at a conference at the Indira Gandhi Institute of Development Research in Mumbai, he said: "I don't think that's what's going to happen... It may happen for a few years ... but I think it is fundamentally uneconomic to believe that markets do not adjust, economies do not adjust."

The American economist said he was not concerned about inflation because wage growth was "going to be very low for the next couple of years".

Posen is at odds with a growing number of his colleagues on the committee who want interest rate rises to curb inflation. Inflation is running at 4%, double the Bank's target, as food, oil and other commodity prices have risen, and is likely to pick up further in coming months.

Sentance has voted for higher rates every month since last June and was joined by Martin Weale and Spencer Dale, the Bank's chief economist, at the February meeting. But while Weale and Dale pushed for a quarter-point increase to 0.75%, Sentance advocated a half-point rise.

By contrast, Posen is worried that interest rate rises could choke off the economic recovery. In a sign that consumers are coming under growing pressure from rising prices and taxes, John Lewis reported a fifth week of subdued sales at its department stores. Sales slid by 0.4% last week from a year ago to £51.24m. A survey on Thursday showed retail sales in February growing at their slowest rate since June while inflationary pressures picked up.

How come all these economists who don't care if you can afford to eat are fat *****?

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The American economist said he was not concerned about inflation because wage growth was "going to be very low for the next couple of years"

I'm curious : how might we research this public sector workers wages?

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I swapped some emails with Mr Posen late last year. I asked him if I could publish them but he said it would be against the spirit he wrote them in - so I haven't.

I think as far as they are concerned there are just two sets of people. Anyone under say 50 has debt and a mortgage to pay. Anyone over 50 owns a house outright and has savings. They think low interest rates benefit the young and are taking income from those over 50 but they are benefitting because the value of their house has shot up in the last decade.

They think their policy makes everyone a winner.

Grey areas don't exist - i.e. people not owning a house with savings, young people with mortgages being crushed by higher living costs due to devaluation, while lower mortgage rates aren't passed on by banks, people renting faced with higher living costs due to devaluation, etc.

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I get really annoyed at these ******** fat cats whose comments are always a mile off the mark.

They say no inflation as wages are not rising, but clearly do not consider the more important fact, which is that people have less purchasing power every month.

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Wages don't have to rise in Britain, in the globalised economy wages can rise elsewhere and effect prices here, and yes, there is wage inflation elsewhere, enjoy your savings as they become worthless.

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I swapped some emails with Mr Posen late last year. I asked him if I could publish them but he said it would be against the spirit he wrote them in - so I haven't.

I think as far as they are concerned there are just two sets of people. Anyone under say 50 has debt and a mortgage to pay. Anyone over 50 owns a house outright and has savings. They think low interest rates benefit the young and are taking income from those over 50 but they are benefitting because the value of their house has shot up in the last decade.

They think their policy makes everyone a winner.

Grey areas don't exist - i.e. people not owning a house with savings, young people with mortgages being crushed by higher living costs due to devaluation, while lower mortgage rates aren't passed on by banks, people renting faced with higher living costs due to devaluation, etc.

Are they really that ******ing dense?

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The fact that guys like Posen make comments like these shows how disconnected they are from the reality for most people.

He is unaware of how people are being squeezed because he sees life only as GDP figure and (most importantly) stockmarket indexes.

He will only associate, on a professional and personal level, with privileged people for whom price inflation isn't an issue because they have ample cash to cover the increased costs.

The only time inflation is a problem is when people start asking for more cash so they can feed and house their families - that impacts profits and the bottom line, so it's bad.

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where have you been?

Back packing holiday around Guantanamo Bay ?

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The official mantra is that interest rates can't possibly rise because that would take money out of peoples pockets (well, those with large amounts of debt - savers would have MORE money) and trash the economy ... whereas inflation which takes money out of EVERYONE's pockets (without a corresponding increase in salary to offset it) is absolutely no problem at all.

It's a bizarre viewpoint, riddled with contradictions, that never goes challenged on any media.

When will the general public twig that the name of the game is to do as much as possible to protect those rich elites who made stupid lending/borrowing/investment decisions from the consequences of their actions at the expense of the general population?

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The official mantra is that interest rates can't possibly rise because that would take money out of peoples pockets (well, those with large amounts of debt - savers would have MORE money) and trash the economy ... whereas inflation which takes money out of EVERYONE's pockets (without a corresponding increase in salary to offset it) is absolutely no problem at all.

It's a bizarre viewpoint, riddled with contradictions, that never goes challenged on any media.

When will the general public twig that the name of the game is to do as much as possible to protect those rich elites who made stupid lending/borrowing/investment decisions from the consequences of their actions at the expense of the general population?

+1

Add in that we have to have cuts to services to protect the hugely inflated public sector salaries/pensions and there is going to be a huge swathe of people for whom the future looks very bleak in the UK.

We are going to rocket up the inequality index.

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I think as far as they are concerned there are just two sets of people. Anyone under say 50 has debt and a mortgage to pay. Anyone over 50 owns a house outright and has savings. They think low interest rates benefit the young and are taking income from those over 50 but they are benefitting because the value of their house has shot up in the last decade.

They think their policy makes everyone a winner.

Grey areas don't exist - i.e. people not owning a house with savings, young people with mortgages being crushed by higher living costs due to devaluation, while lower mortgage rates aren't passed on by banks, people renting faced with higher living costs due to devaluation, etc.

I guess there's a reason the heterodox economists call this lot autistic.

Their reasoning is based on such a tiny number of variables that it must be inappropriate for a complex system like an economy. It's like a doctor making all his diagnoses on the basis of blood pressure, and his only treatments being bloodletting or transfusions. There are other things that can go wrong!

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http://www.guardian.co.uk/business/2011/feb/25/bank-of-england-split-adam-posen-downplays-inflation-threat

How come all these economists who don't care if you can afford to eat are fat *****?

The thing that really boils my piss is the never-ending barrage of bullsh*t about "inflation"

Inflation is not price rises. Price rises are a consequence of inflation of the money supply. Prices can also rise, of course, as a result of a deflation of supply of the things that money can be exchanged for and also (if you have to import most of your stuff from overseas) as a consequence of your currency being subject to lower demand

It does not rain because the ground gets wet.

Also, it's odd how the government has bugger all to say about price rises in the shops, presumably on the basis that they see this as a natural, inevitable and justifiable response to rising costs while, at the same time, consider that the price of labour rising to meet those increased costs is somehow unatural, avoidable and not justifiable.

In other words, they believe in a free-market when to comes to what the people have to buy, but not when to comes to what the people have to sell.

Edited by tallguy

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The official mantra is that interest rates can't possibly rise because that would take money out of peoples pockets (well, those with large amounts of debt - savers would have MORE money) and trash the economy ... whereas inflation which takes money out of EVERYONE's pockets (without a corresponding increase in salary to offset it) is absolutely no problem at all.

It's a bizarre viewpoint, riddled with contradictions, that never goes challenged on any media.

When will the general public twig that the name of the game is to do as much as possible to protect those rich elites who made stupid lending/borrowing/investment decisions from the consequences of their actions at the expense of the general population?

I know.

It drive me bonkers, the level of apathy and ignorance

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The thing that really boils my piss is the never-ending barrage of bullsh*t about "inflation"

Inflation is not price rises. Price rises are a consequence of inflation of the money supply. Prices can also rise, of course, as a result of a deflation of supply of the things that money can be exchanged for and also (if you have to import most of your stuff from overseas) as a consequence of your currency being subject to lower demand

It does not rain because the ground gets wet.

Also, it's odd how the government has bugger all to say about price rises in the shops, presumably on the basis that they see this as a natural, inevitable and justifiable response to rising costs while, at the same time, consider that the price of labour rising to meet those increased costs is somehow unatural, avoidable and not justifiable.

the thing that really boils my piss is that these guys pretend they have the country at heart.

They are there for one reason and one reason only...stability in the banking system...we could all disappear tommorrow in a black hole of debt, lie dead in the streets by the hundreds, but, if the banks were OK, they could tick all their daily boxes and sleep soundly in the knowledge they did their task brilliantly.

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It does not rain because the ground gets wet.

Like that one.

But, pissiing on you whilst telling you it is raining is probably even more accurate to what is going on.

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the thing that really boils my piss is that these guys pretend they have the country at heart.

They are there for one reason and one reason only...stability in the banking system...we could all disappear tommorrow in a black hole of debt, lie dead in the streets by the hundreds, but, if the banks were OK, they could tick all their daily boxes and sleep soundly in the knowledge they did their task brilliantly.

Yep.

Meanwhile, the average citizen is down the pub winging about the price of bread and the cost of petrol without bothering to join the bleeding dots.

What will it actually take before the people finally kick off? I mean really?

What will it take?

Edited by tallguy

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Like that one.

But, pissiing on you whilst telling you it is raining is probably even more accurate to what is going on.

Yep.

Sounds about right

Edited by tallguy

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Yep.

Meanwhile, the average citizen is down the pub winging about the price of bread and the cost of petrol without bothering to join the bleeding dots.

What will it actually take before the people finally kick off? I mean really?

What will it take?

These people because of their inability to think are dangerous and they will become more dangerous as the situation deteriorates.So few people have any grasp of basic economics – they have no idea where prosperity comes from. So few people understand that human rights are individual rights and that entitlements are not rights… These people are going to ask for Big Brother to take them in hand, and Big Brother is going to give them what they ask for, good and hard.

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Inflation Targeting: Lessons from the International Experience [Paperback]

Ben S. Bernanke (Author), Adam S. Posen (Author), Thomas Laubach (Author), Frederic S. Mishkin (Author)

One team, one dream...

Frederic Mishkin -- the banking industry's favourite economist-for-rent.

How much money will Posen be paid by the banks after his term on the MPC for "consulting" and "making speeches" (i.e. whoring our his fat ar_e)? These people know where their financial interests lay, and it's not in doing what they're paid to do on the MPC.

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These people because of their inability to think are dangerous and they will become more dangerous as the situation deteriorates.So few people have any grasp of basic economics – they have no idea where prosperity comes from. So few people understand that human rights are individual rights and that entitlements are not rights… These people are going to ask for Big Brother to take them in hand, and Big Brother is going to give them what they ask for, good and hard.

UK Stagflation Worsens (Cold Blamed) After GDP Revised Even Lower, LSE Promptly Halts Trading

Submitted by Tyler Durden on 02/25/2011 07:34 -0500

Bank of EnglandDouble DipGross Domestic ProductrecoverySigma XStagflationUnited KingdomVolatility

Following a surprising confirmation of a double dip in the UK a few weeks ago, after GDP was reported to have dropped by 0.5%, today the economic growth number was revised even lower, coming in at -0.6%. Per Bloomberg: "Gross domestic product fell 0.6 percent from the previous three months, compared with an initial estimate for a 0.5 percent drop, the Office for National Statistics said today in London." Yet how pathetic would a country be seen if it didn't blame a weak winter data point on the snow: "The statistics office said its “best estimate” for the impact of cold weather on the data remains 0.5 percent. The slump was led by construction and investment. The coldest December in a century hampered the recovery, dragging the economy to its worst performance in more than a year. The Bank of England kept its key interest rate on hold this month as inflation at twice the 2 percent target led to a four-way split among officials. Recent surveys suggest the contraction may have been a temporary setback, with services resuming growth in January and manufacturing strengthening." Of course, with no additional money printing (for now) it may well have been permanent. We will need to wait until spring showers are blamed for another 1% or so drop. And it wasn't even half an hour later that the entire London Stock Exchange crashed. "Investors were left in limbo as the London Stock Exchange halted trading due to a technical glitch, dealing an embarrassing blow to its new systems. The LSE, which launched its new trading system last week, suspended dealings before the opening bell on Friday morning in the latest in a string of technical problems." Snow was not blamed: "It blamed issues with the market data technology and said it was investigating the problem." So once again, just like in the case of the Italian market a week ago, the second there is the potential for massive market volatility following disappointing data, a market wide "circuit breaker" comes in preventing anyone from selling. Truly an effective solution to retain asset price stability.

More on the LSE's travails:

The LSE's woes come at a bad time for traders, with major economic news in the UK after the latest gross domestic product figures and ongoing volatility amid the Libyan political crisis.

Joshua Raymond, market strategist at City Index, said: "It's yet another glitch to trading and traders, who still remember the same issues that halted trading for some three hours in 2009, and they will undoubtedly be venting fury this morning at the LSE.

"At a time of uncertainty in the markets, where traders are having to keep on their toes with the situation in Libya, the last thing they need is an unexpected halt to trading."

The technical troubles came in the same week that Borsa Italiana - the LSE's Milan platform - suffered a five-hour outage.

The LSE's new Millennium Exchange trading system has got off to a rocky start since being rolled out on the group's smaller Turquoise platform last October. Trading was suspended for two hours on Turquoise in November, after teething problems led to glitches on the second day of operation. It is also thought the LSE is facing claims that technical problems meant prices were not correctly displayed for some traders last week.

The difficulties present a headache for the LSE as it comes under increasing competition. Xavier Rolet, chief executive of the LSE, has led the push for new technology to improve the exchange in the face of rivalry from the likes of Chi-X Europe.

Meanwhile, the LSE has been joining forces globally in a bid to increase its scale and might. It unveiled a deal to merge with Canada's TMX, which operates the Toronto Stock Exchange, earlier this month.

In light of the ongoing exchange consolidation, perhaps it is time for Sigma X to finally come out of the closet and buy all these money losing enterprises, thereby giving REDI 100% control of the market.

And speaking of Goldman, did anyone believe the suddenly biggest spinmaster could allow a bad data point to come out without attempting to present it in some gloriously silver lining:

There were small downward revisions to output in both services and manufacturing, only partly offset by a small upward revision to construction. The latter two we knew about ahead of the release, the first we did not.

Most of the weakness was concentrated in December. There was no sector that saw any growth that month and, at least according to these estimates, output collasped in sectors most vulnerable to the weather collapsed: activity in consumer services (leisure, transport) fell by 4%mom and the construction sector shrunk 16%mom (nsa). It seems likely, therefore, that a good part of the weakness can be blamed on the snow.

Whether the impact on whole-economy growth is exactly 0.5%pts, as the ONS claims, is quite another question. These early estimates are innacurate enough to begin with. The ONS's opinion about the impact of the weather - and it is just that (an opinion) - can only be more uncertain. What we do know is (i) business surveys are uniformly stronger - they all point to positive growth in Q4 and an acceleration in activity in January (see the three graphs below, covering consumer services, business services and private-sector output in aggregate) (ii) whatever the true impact of the weather, it got a lot better in the New Year. We are confident, therefore, of seeing a material bounce in the preliminary estimate of GDP in 2011Q1 (published at the end of April), enough to ensure reasonable, if below-trend, growth across Q4 and Q1 together. Our current expectation is +1.2%qoq.

And when that number disappoints, Goldman can just blame it all on lack of money printing. Just like they will soon do with the US itself.

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Yep.

Meanwhile, the average citizen is down the pub winging about the price of bread and the cost of petrol without bothering to join the bleeding dots.

What will it actually take before the people finally kick off? I mean really?

What will it take?

Who knows? I do know that people in Britain are predisposed to accepting a whole heap of crap being dumped upon them - you only have to look at Ireland which is culturally very close, where the state has been bankrupted because politicians decided to bail out the banks at any cost.

Despite the country being shafted for decades because of this bizarre (bizarre in the context that the politicians are supposed to be looking out of the interests of the country) decision, aside from grumbling about it the general public seem to be doing very little. No mass protests, no calls for judicial inquiries. Just lots of bellyaching and still a widespread ignorance of the way the financial system operates.

Oh, they'll kick out the political party that got them into the mess only to put another one who also fully supports the state continuing to pay back the banksters' bad debts and I'll wager that they'll even vote the original shower of idiots back in within a decade. They'll be spending the next 10-20 years grumbling about how bad things are without every thinking of exactly WHY they are in such a bad way.

With that in mind, the only thing that'll motivate people into taking action I'd guess will be when things get so bad that the average person can't afford enough food to fill their bellies. Up until that point they'll accept any amount of reaming by the elites as long as it's sugar coated with dumbed down trash TV, celebrity role models, freely available cheap booze, overhyped sports and the crutch of credit to make up for ever decreasing real wealth.

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To take a contrary view, it is a natural event that we in the west are going to have to work harder if we want to maintain the same standard of living we were used to. The bit that makes me want to molotov these fvckers is that the wealthiest section of society are determined that this won't apply to them, and therefore the rest of us are going to be even worse off than necessary.

"All in it together" my ar$e...

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To take a contrary view, it is a natural event that we in the west are going to have to work harder if we want to maintain the same standard of living we were used to. The bit that makes me want to molotov these fvckers is that the wealthiest section of society are determined that this won't apply to them, and therefore the rest of us are going to be even worse off than necessary.

"All in it together" my ar$e...

It is worse than that, their actions are making it nigh-on impossible for that harder work to make any positive difference whatsoever in the outcome.

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  • 312 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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