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Crunch Time Coming For The Mpc?

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When Brown handed the BoE control of interest rates in 97 he was supported by economic theory.

Expectations of inflation and interest rates have justifiably been lower since because independent control removes the ability for government to print money for short term political gain - inevitably followed by increased inflation and therefore increased interest rates.

Lower expectations of interest rates can be used to justify part of the asset price boom (though lower inflation would also suggest that debt will take longer to erode!)

However, these beneficial lower expectations critically depend on the BoE's credibility vis-a-vis their commitment to fight inflation.

With inflation having recently risen (even on the new basis excluding housing costs), this credibility could be seriously tested for the first time.

It could be crunch time for the MPC...

That economic theory partly depends on the theory of rational expectations. I.e. that rational agents in a market may all have different views on future inflation for example but that the mean of those views will be correct.

I would like to test that theory and also prove that there is more intelligence than VI bias in the HPC community.

If you are happy to play along then please use the poll to indicate what you reckon the inflation rate will be in the report due to be published by the BoE on 18th Oct.

Please feel free to vote for any option and try not to be swayed by those that have voted before you.

Have fun...

Editing to add the clarification that this the inflation rate as estimated by the Consumer Price Index.

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If their 'success is deferred' this month and it goes up too much, they can always 'do a Brown' and move the target to 3%.

If it's good enough for education and the chancellor, why not the MPC?

When I went to the pub last week and stayed-out a bit too late, I just told my girlfriend my successful return home was deferred, and I was moving the return time target back by an hour. An hour later I returned home successfully, and on time! Brilliant!

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I think it will be around 2.8% but like the weather, the government will look on the bright side and put it down to a combination of temporary factors including the spike in fuel prices due to Katrina and Rita, EU restrictions on Chinese imports, and perhaps higher than expected bonuses for some workers due to some companies doing will in our strong economy :lol::lol:

Of course these inflation figures have nothing to do with that being felt by the man on the street Brown just wants them to feel secure inthe knowledge that the money they are able to borrow against the value oftheir house is more than enough to cover their debts and pay for their retirement. We are comming to the end of the period where Brown lures people into debt to fuel his economic bubble with low interest rates, the trap is about to slam shut leaving millions in negative equity and debt.

Lowering interest rates is not a solution it is simply compounding the problem, interest rates should always be above real inflation at the moment they are not so sterling will continue to fall. Its no good comparing the exchange rate to the dollar as that is in the same boat, the only real measure of sterlings value is against gold and look whats happening there B)

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There is no such thing as something called "inflation" that can be measured with precision and influenced by the MPC on a monthly basis.

CPI, RPI, uncle Tom Cobbly and All PI are all utterly meaningless. How can you conflate a price change in, say, Pomegranates and a price change in flat screen TV's and even pretend that the result has any meaning to anyone.

NO, These numbers are just a tool used by the Hoy Phylakes to keep the Hoy Polloy from realising that the real inflation - never ending issuance of new currency and credit - will go on forever.

The issuance of currency and credit continues at an alarming and increasing pace and we have a vote on inflation where the maximum number you can vote for is <4%. Thats a perfect illustration of how well the tool works.

Inflation is and has been rampant and the people are just waking up to its consequences. Expect the MPC and their international equivalents to ramp up the propaganda machine. "We will never let inflation get out of control", "we will be really tough on inflation". All while ramping out currency and credit as if it were just paper and ink.

Remember this - the purpose of the central bank is to perpetuate inflation. It does not and cannot have any other purpose. Yet they can only succeed in perpetuating inflation so long as they keep inflation expectations under control. What better way to control expectations then to keep every one focussed on a meaningless number.

BAB

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Before I vote - what inflation is it you're asking?

CPI, RPIX or RPI?

Please reply and alter your first post for others to know.

cheers

FP

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CPI, RPI, uncle Tom Cobbly and All PI are all utterly meaningless. How can you conflate a price change in, say, Pomegranates and a price change in flat screen TV's and even pretend that the result has any meaning to anyone.

NO, These numbers are just a tool used by the Hoy Phylakes to keep the Hoy Polloy from realising that the real inflation - never ending issuance of new currency and credit - will go on forever.

Thats interesting and probably very true. Would you say that most of the new currency is issued though loans and mortgages (rather than printed or via wages?) That would explain why this inflation is chasing house prices rather than baked beans. Thats why baked beans dont sell for £1 a tin, but a pile of bricks and claim on patch of land sells for £200000.

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If their 'success is deferred' this month and it goes up too much, they can always 'do a Brown' and move the target to 3%.

If it's good enough for education and the chancellor, why not the MPC?

When I went to the pub last week and stayed-out a bit too late, I just told my girlfriend my successful return home was deferred, and I was moving the return time target back by an hour. An hour later I returned home successfully, and on time! Brilliant!

the walls in your house must ring with laughter

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the walls in your house must ring with laughter

Quite a lot, yeah. It beats a stoney bitter silence.

"shut it oil-child"

"the walls in your house must ring with laughter"

"What a CROCK OF SH!T tulip!"

"zzzzzzzz"

"these people are your brothers and sisters you FKING FASCIST!!!"

"get real. ricky lake is for retards only."

"you are yet another example of this modern pradigm of greed and self-obsession."

etc...

Sorry about this mods, feel free to remove this pointless exchange.

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Before I vote - what inflation is it you're asking?

CPI, RPIX or RPI?

Please reply and alter your first post for others to know.

cheers

FP

Apologies for not making that clear - my intention was that we guess inflation as the headline figure reported in the BoE's Inflation Report - hence CPI.

Have edited my first post.

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Apologies all - it is the ONS that will publish the September report on 18th October. Link to August report here:

http://www.statistics.gov.uk/pdfdir/cpibrief0905.pdf

http://www.statistics.gov.uk/pdfdir/cpi0905.pdf

The BoE inflation report will not be published till 16th November. Link to August report here:

http://www.bankofengland.co.uk/publication...report/2005.htm

BTW thanks to whoever pinned this post.

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There is no such thing as something called "inflation" that can be measured with precision and influenced by the MPC on a monthly basis.

CPI, RPI, uncle Tom Cobbly and All PI are all utterly meaningless. How can you conflate a price change in, say, Pomegranates and a price change in flat screen TV's and even pretend that the result has any meaning to anyone.

NO, These numbers are just a tool used by the Hoy Phylakes to keep the Hoy Polloy from realising that the real inflation - never ending issuance of new currency and credit - will go on forever.

The issuance of currency and credit continues at an alarming and increasing pace and we have a vote on inflation where the maximum number you can vote for is <4%. Thats a perfect illustration of how well the tool works.

Inflation is and has been rampant and the people are just waking up to its consequences. Expect the MPC and their international equivalents to ramp up the propaganda machine. "We will never let inflation get out of control", "we will be really tough on inflation". All while ramping out currency and credit as if it were just paper and ink.

Remember this - the purpose of the central bank is to perpetuate inflation. It does not and cannot have any other purpose. Yet they can only succeed in perpetuating inflation so long as they keep inflation expectations under control. What better way to control expectations then to keep every one focussed on a meaningless number.

BAB

I agree with you BAB. It's a shame that although inflation is such a key statistic, it is much harder to estimate than something like GDP.

However, I wouldn't say that it is meaningless. 2.4% CPI is probably underestimating inflation but were it to breach 3% for a significant period of time the MPC's credibility would evaporate. It could therefore be argued that this number actually has more meaning than a more accurate estimate of inflation.

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  • 301 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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