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Are Boe Members Personal Incentivised To Allow Inflation

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As mentioned in one comment the Save Our Savers page : http://www.saveoursavers.co.uk/articles/savers-responses-to-interest-rate-inaction/

ir Mervyn King and his colleagues who, as some pointed out, belong to a pension scheme that moved heavily into index-linked gilts over two years ago, hardly a sign of faith in the MPC’s ability.

Thinking about this, doesn't this actually mean that whilst wage growth is low or non-existent, that the members of the BOE are actually personally incentivised to allow inflation to run wild. Their pensions being inflation linked means that they become relatively richer to those (most of the population) unable to obtain inflation linked savings and/or pensions.

I would argue that this is exactly the wrong incentive to give the members of the BOE, I would argue that they should have their wages and their pension linked exactly to the inflation target, failure to meet the target would therefore make them relatively poorer, and this would therefore incentivise them, personally, to ensure that inflation is at or below target.

oz

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As mentioned in one comment the Save Our Savers page : http://www.saveoursavers.co.uk/articles/savers-responses-to-interest-rate-inaction/

Thinking about this, doesn't this actually mean that whilst wage growth is low or non-existent, that the members of the BOE are actually personally incentivised to allow inflation to run wild. Their pensions being inflation linked means that they become relatively richer to those (most of the population) unable to obtain inflation linked savings and/or pensions.

I would argue that this is exactly the wrong incentive to give the members of the BOE, I would argue that they should have their wages and their pension linked exactly to the inflation target, failure to meet the target would therefore make them relatively poorer, and this would therefore incentivise them, personally, to ensure that inflation is at or below target.

oz

I suppose there are two issues.

Firstly, Merv and Co are on a defined benefit scheme, with RPI-linking. So that means they don't get hit for screwing up their inflation forecasts, or, given they'll have retired by then, previous Governors don't get hit for the current crop's errors.

Secondly, the BoE pension fund did move into index-linked securities, which points to a strategy that relies on Merv's predictions being wrong in order for the fund to perform well or justify the investment decision. I doubt Merv has much involvement in his pension fund management, what with him having to spend all that time colouring in his fan charts, but I wonder if he reflects on the fact that the sustainability of his looming lavish retirement is in part dependent on his incompetence.

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As mentioned in one comment the Save Our Savers page : http://www.saveoursa...-rate-inaction/

Thinking about this, doesn't this actually mean that whilst wage growth is low or non-existent, that the members of the BOE are actually personally incentivised to allow inflation to run wild. Their pensions being inflation linked means that they become relatively richer to those (most of the population) unable to obtain inflation linked savings and/or pensions.

I would argue that this is exactly the wrong incentive to give the members of the BOE, I would argue that they should have their wages and their pension linked exactly to the inflation target, failure to meet the target would therefore make them relatively poorer, and this would therefore incentivise them, personally, to ensure that inflation is at or below target.

oz

I think you are looking at this the wrong way around.

They decided they were going to generate inflation, engineered a very prompt and short 25% devaluation of sterling and preemptively put their pensions in inflation protected bonds.

Their decision to create inflation incentivised them to move into inflation linked bonds, not the other way around.

If anything I think they are surprised by how low inflation is.

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As mentioned in one comment the Save Our Savers page : http://www.saveoursavers.co.uk/articles/savers-responses-to-interest-rate-inaction/

Thinking about this, doesn't this actually mean that whilst wage growth is low or non-existent, that the members of the BOE are actually personally incentivised to allow inflation to run wild. Their pensions being inflation linked means that they become relatively richer to those (most of the population) unable to obtain inflation linked savings and/or pensions.

I would argue that this is exactly the wrong incentive to give the members of the BOE, I would argue that they should have their wages and their pension linked exactly to the inflation target, failure to meet the target would therefore make them relatively poorer, and this would therefore incentivise them, personally, to ensure that inflation is at or below target.

oz

Excellent question!

Actually I think you have a great FOI question there (Freedom Of Information) :

"Are Boe Members Personal Incentivised To Allow Inflation?"

Very good. You should send it to them. With copies to the press - and tell the BoE bout these copies as well.

And do detail the question a bit more, including this specific sub-question about this pension fund, and perhaps also if they have fixed rate mortgages - and/or any personal advantages within an inflationary environment.

Good question.

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As mentioned in one comment the Save Our Savers page : http://www.saveoursavers.co.uk/articles/savers-responses-to-interest-rate-inaction/

Thinking about this, doesn't this actually mean that whilst wage growth is low or non-existent, that the members of the BOE are actually personally incentivised to allow inflation to run wild. Their pensions being inflation linked means that they become relatively richer to those (most of the population) unable to obtain inflation linked savings and/or pensions.

I would argue that this is exactly the wrong incentive to give the members of the BOE, I would argue that they should have their wages and their pension linked exactly to the inflation target, failure to meet the target would therefore make them relatively poorer, and this would therefore incentivise them, personally, to ensure that inflation is at or below target.

oz

...if this is the case we need to have an investigation to expose any wrongdoing....it would in effect be treason... :rolleyes:

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FOI draft, feedback would be gratefully received

Dear Bank of England,

As is well known inflation in the UK has been above the BOE target for 19 months, and in fact it has been above target with a few notable exceptions through much of 2006, 2007 and 2008 as well.

It is also noted that the BOE pension funds are indexed to the generally higher RPI figure. At a time when wage growth is very low to static, and most of the population is unable to achieve CPI let alone RPI growth in their savings or pensions, it seems that the BOE are actually personal incentivised to pursue a policy of above target inflation, it makes it's members relatively wealthier.

As such I would like to make two specific FOI requests.

Firstly could you please provide details of why the RPI inflation index is used, and why given the governments (and many organisations) decision to move to CPI based indexing of pensions the BOE has not followed suit. Specifically I would like to see information regarding the discussion around the index to be used for pensions, why the decision to use RPI is maintained and the key individuals involved in these decisions.

Secondly what personal financial incentives are known by the BOE regarding its members that are benefited by low rates and high inflation. Specifically mortgages, both personal residential or investment properties (both personally held or via holding/investment companies), foreign currency investments, commodities or any other assets that benefit from this malignant low base rate and high inflation environment.

Edited by Guest

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FOI draft, feedback would be gratefully received

...last paragraph the word 'know ' ...should it be 'known'....or would 'provided' be more appropriate...?... :unsure:

Secondly what personal financial incentives are know by the BOE regarding its members that are benefited by low rates and high inflation. Specifically mortgages, both personal residential or investment properties (both personally held or via holding/investment companies), foreign currency investments, commodities or any other assets that benefit from this malignant low base rate and high inflation environment.

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Putting your time and effort into crafting your letter at a bunch of arrogant dictators who will probably ignore it and at best pass it to a temp to churn out a standardised reply complete with lasered signature.

They just don't give a rat's behind what the peasants want, they raise their middle finger to the lot of us because that's the system we the people allowed them to build while they distracted us with Britain's Got Talent and the lure of large screen tellies to watch the footie

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Putting your time and effort into crafting your letter at a bunch of arrogant dictators who will probably ignore it and at best pass it to a temp to churn out a standardised reply complete with lasered signature.

They just don't give a rat's behind what the peasants want, they raise their middle finger to the lot of us because that's the system we the people allowed them to build while they distracted us with Britain's Got Talent and the lure of large screen tellies to watch the footie

...it's worth a try....don't be a victim.....be a vigilante.... :rolleyes:

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...it's worth a try....don't be a victim.....be a vigilante.... :rolleyes:

To me they seem to be an QUANGO and above the electorate outfit and should not be in existence. A letter to them is laughable, applaudable citizenship though it may be, the whole thing is rotten and a letter to them is like a letter to a fox outside the hen house

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To me they seem to be an QUANGO and above the electorate outfit and should not be in existence. A letter to them is laughable, applaudable citizenship though it may be, the whole thing is rotten and a letter to them is like a letter to a fox outside the hen house

...BofE are no quango...part of the public sector ..?....yes...and therefore our servants....give them a piece of bait to see if they are covering anything up....do you think these people are all smart...?....I don't .... :rolleyes:

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...BofE are no quango...part of the public sector ..?....yes...and therefore our servants....give them a piece of bait to see if they are covering anything up....do you think these people are all smart...?....I don't .... :rolleyes:

I'd like to tell you what I think they are but I'll be banned.

I think even if 60 million of us wrote they'd middle finger it, but best of luck

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How many countries with MoM interest rate rises have actually managed to curb inflation!?

IMHO this is the problem of being behind the curve, you want to nip inflation you need to get ahead of it. E.g. if inflation is running at 3% and your rates are 2% you still have negative real rates, inflation moves to 4% and you move rates to 3% you're still behind with negative real rates. You want to curb inflation, set rates to provide a real positive rate.

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As mentioned in one comment the Save Our Savers page : http://www.saveoursavers.co.uk/articles/savers-responses-to-interest-rate-inaction/

Thinking about this, doesn't this actually mean that whilst wage growth is low or non-existent, that the members of the BOE are actually personally incentivised to allow inflation to run wild. Their pensions being inflation linked means that they become relatively richer to those (most of the population) unable to obtain inflation linked savings and/or pensions.

I would argue that this is exactly the wrong incentive to give the members of the BOE, I would argue that they should have their wages and their pension linked exactly to the inflation target, failure to meet the target would therefore make them relatively poorer, and this would therefore incentivise them, personally, to ensure that inflation is at or below target.

oz

+1

This touches on the same issue that got discussed in the recent 'Sheeple' thread. Separate people from the consequences of their own actions and inintended consequences ensue. If the MPC couldn't front-run their policies and pile into linkers, we might have very different monetary outcomes in this country.

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+1

This touches on the same issue that got discussed in the recent 'Sheeple' thread. Separate people from the consequences of their own actions and inintended consequences ensue. If the MPC couldn't front-run their policies and pile into linkers, we might have very different monetary outcomes in this country.

...so this means that the rich retired that do not work are getting better pay rises than those that are working....more reason to believe that index-linked final salary pensions are unaffordable ongoing. :o

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the members of the BOE are actually personally incentivised to allow inflation to run wild. Their pensions being inflation linked means that they become relatively richer to those (most of the population) unable to obtain inflation linked savings and/or pensions.

In fact isn't the incentive the exact opposite? Better still for the BoE members might be horrendous deflation, where prices fall 10%pa, but their pensions remain the same in nominal terms, buying more and more each year.

As it is, 10%pa "true" inflation means their pensions go up 5%pa (RPI) and they are worse off.

Alternatively, if you think index-linked gilts are such an amazing investment, why not just move your own pension fund into them...?

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In fact isn't the incentive the exact opposite? Better still for the BoE members might be horrendous deflation, where prices fall 10%pa, but their pensions remain the same in nominal terms, buying more and more each year.

As it is, 10%pa "true" inflation means their pensions go up 5%pa (RPI) and they are worse off.

Alternatively, if you think index-linked gilts are such an amazing investment, why not just move your own pension fund into them...?

Do you complain when the price of petrol or your rent deflates? :)

The problem is two-fold: the BoE front-ran their own inflationary policies in the most egregious way. And second, their actions hurt the people without pensions to invest the hardest.

Bottom line: these people are criminals.

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How many countries with MoM interest rate rises have actually managed to curb inflation!?

Especially when interest rate increases will contribute to the inflation figures.

Interestrate theory is a crock of 5h1t.

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  • 276 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% +
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      • Even
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