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Executive Sadman

The Bank Of England

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http://www.zerohedge.com/news/2013-08-12/bank-england-worst-central-bank-europe

The Bank of England has missed its inflation target more than any other major European central banks in the past five years. As Bloomberg Brief notes, while BOE Governor Mark Carney linked monetary policy to unemployment last week, the BOE has failed to meet its CPI goal 90 percent of the time. Hungary is the second-worst performing, having missed its target 88 percent of the time. The best performers have been the Swiss and Norwegian central banks, which have a 5 percent and 20 percent miss rate, respectively. To rub further salt into the open wound of hope in the UK, it has also had the largest average deviation from its target inflation rate overall.

So while Krugman-esque ultra loose monetary policy has delivered the biggest european drop in income outside the crisis economy of Greece, in Switzerland wages continue apace.

http://snbchf.com/2013/03/swiss-wages-keep-on-rising-no-sign-of-deflationary-pressures/

It seems clear to me. Money/credit, like everything else, is a commodity. If a commodity is cheap, you use it recklessly. If petrol is 5p a litre, you will buy a V8 supercar and go on joy rides. If its costly, you will channel it into things that result in the best return. Its not states like Zimbabwe, who follow the Krugman model of money printing that are rich, but states that do the exact opposite, like Switzerland, who benefit. Nominal rates are irrelevant. If prices are rising faster than wages, there is too much credit in the system.

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The article says that it missed 90% of the time, but it has certainly not exceeded it that often. The target has been around since 1997 and most of the time it undershot.

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http://www.zerohedge...ral-bank-europe

The Bank of England has missed its inflation target more than any other major European central banks in the past five years. As Bloomberg Brief notes, while BOE Governor Mark Carney linked monetary policy to unemployment last week, the BOE has failed to meet its CPI goal 90 percent of the time. Hungary is the second-worst performing, having missed its target 88 percent of the time. The best performers have been the Swiss and Norwegian central banks, which have a 5 percent and 20 percent miss rate, respectively. To rub further salt into the open wound of hope in the UK, it has also had the largest average deviation from its target inflation rate overall.

So while Krugman-esque ultra loose monetary policy has delivered the biggest european drop in income outside the crisis economy of Greece, in Switzerland wages continue apace.

http://snbchf.com/20...nary-pressures/

It seems clear to me. Money/credit, like everything else, is a commodity. If a commodity is cheap, you use it recklessly. If petrol is 5p a litre, you will buy a V8 supercar and go on joy rides. If its costly, you will channel it into things that result in the best return. Its not states like Zimbabwe, who follow the Krugman model of money printing that are rich, but states that do the exact opposite, like Switzerland, who benefit. Nominal rates are irrelevant. If prices are rising faster than wages, there is too much credit in the system.

+1

Yes! Krugman would have us believe that austerity is root of all Europe's ills not the thirty year debt-fueled binge that preceded it.

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The article says that it missed 90% of the time, but it has certainly not exceeded it that often. The target has been around since 1997 and most of the time it undershot.

So if it undershot it still missed it's target? Yes?

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So if it undershot it still missed it's target? Yes?

Yes, but clearly the narrative of the article and subsequent targets is that is has overshot 90% of the time. The Zerohedge article did not provide the data, but inflation started spiking when oil went up hugely and the cost of goods subsequently rose. The second impact over the last few years has been QE - in my opinion a direct cause in the fall in the pound and the subsequent rise in import costs and for this the Bank can well and truly be blamed.

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Yes, but clearly the narrative of the article and subsequent targets is that is has overshot 90% of the time. The Zerohedge article did not provide the data, but inflation started spiking when oil went up hugely and the cost of goods subsequently rose. The second impact over the last few years has been QE - in my opinion a direct cause in the fall in the pound and the subsequent rise in import costs and for this the Bank can well and truly be blamed.

The article specifically talks about the last five years:

The Bank of England has missed its inflation target more than any other major European central banks in the past five years. As Bloomberg Brief notes, while BOE Governor Mark Carney linked monetary policy to unemployment last week, the BOE has failed to meet its CPI goal 90 percent of the time.

In the last five years, the BoE has consistently OVERSHOT so the narrative is quite correct.

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The article says that it missed 90% of the time, but it has certainly not exceeded it that often. The target has been around since 1997 and most of the time it undershot.

May '97 - Nov '03 (RPIX targetting 2.5%)

--------------------------------------------

Over target: 29 (months)

Under: 38

On:6

http://www.ons.gov.uk/ons/datasets-and-tables/data-selector.html?cdid=CDKQ&dataset=mm23&table-id=2.2

Dec '03 - present (CPI targetting 2%)

--------------------------------------------

Over:82

Under:30

On:3

Worth noting that it took 18 months to bring CPI up to target after the Dec '03 switch. Since Jun '05 only 12 monthly CPI stats have been under target.

http://www.theguardian.com/news/datablog/2009/mar/09/inflation-economics

I think those totals pretty much tell the story. After the switch to CPI, things went out of hand.

Edit, made an error as RPI target was 2.5% not 2%, apologies.

Edited by cheeznbreed

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Historical UK inflation rates 2000-2013:

http://www.bbc.co.uk/news/10612209

CPI target (blue line) is 2%. Not too difficult to see that the (heavily downwardly manipulated) rate has managed to overshoot the target consistently in the last five years, the only exception being a brief period around 2008 when we actually started to see the beginnings of deflation (promptly reversed by QE and interest rate suppression).

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I have been around longer than most on here and during that time have come to understand that stuff that would have been thought of as unacceptable by the overwhelming majority of people can become regarded as acceptable over time. The performance of the BoE, house prices and the public attitude to debt are testament to that.

Edited by campervanman

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The 2% inflation target was set by the greatest economist that ever lived.

A Mr Gordon Brown.

The fact that the BofE isn't keeping to this target should be a worry to us all.

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When did we start saying 'Not fit for purpose'

I can remember the before time, but I don't remember ever thinking 'oh there's a useful phrase that'll come to dominate all political debate in Britain'.

Anyway, the BOE 'are basically evil psychopaths', a phrase I think will come to dominate all political debate in Britain.

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This cliché came in at about the time that "charter" was on the wain, presumably because both can be used in the same context e.g. 'tax rules are not fit for purpose' can be written as 'the tax rules are a tax dodger's charter'.

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This cliché came in at about the time that "charter" was on the wain, presumably because both can be used in the same context e.g. 'tax rules are not fit for purpose' can be written as 'the tax rules are a tax dodger's charter'.

Oh that's it, I remember that, I think it was a bit after the 'at the end of the day' madness.

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Oh that's it, I remember that, I think it was a bit after the 'at the end of the day' madness.

John Reid was instrumental in the phrase being widely used, the Home office being the subject of his use. Matthew Parris had a slot on R4 years ago when he too mused over the popularity of the phrase iirc.

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Not sure where to post this as there are hundreds of BoE / gilt type threads and I didn't think it worth starting another.

So here goes.

Carneys Forward Guidance running into problems:

http://www.mindfulmoney.co.uk/wp/shaun-richards/problems-are-mounting-for-mark-carney-and-his-forward-guidance-for-interest-rates/

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May '97 - Nov '03 (RPIX targetting 2.5%)

--------------------------------------------

Over target: 29 (months)

Under: 38

On:6

Dec '03 - present (CPI targetting 2%)

--------------------------------------------

Over:82

Under:30

On:3

Worth noting that it took 18 months to bring CPI up to target after the Dec '03 switch. Since Jun '05 only 12 monthly CPI stats have been under target.

I think those totals pretty much tell the story. After the switch to CPI, things went out of hand.

Edit, made an error as RPI target was 2.5% not 2%, apologies.

and in the May '97 - Nov '03 period the RPI target was being missed more regularly in the latter years of that period and RPI was rapidly increasing and getting well out of control as they approached the change to CPI. The CPI target also being exceeded (and often well exceeded) far more often than not.

The BoE is indeed not fit for purpose.

Edited by billybong

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