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Mpc's Real Target Was Ngdp Growth Not Inflation

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Extraordinary admission, long suspected on here, that the MPC spent the last five years simply ignoring its legal mandate. How could they get it wrong so often were it not their intention to do so?

This raises as many questions as it answers, not least about the legality of the Bank's behaviour and the cataract of lies that's made up its public misrepresentation. Time to haul Mervo the Clown before a public enquiry?

http://www.telegraph...dbent-says.html

Bank targeted growth for rate decisions, Ben Broadbent says

A Bank of England policymaker has admitted the widely-held belief that interest rates have been set in response to changes in growth rather than the official inflation mandate.

By Philip Aldrick, Economics Editor 7:01PM BST 23 Sep 2013

Ben Broadbent, an external member of the Monetary Policy Committee (MPC), made the revelation as part of an attempt to explain the Bank's new 7pc unemployment target, which he claimed was now more relevant than growth due to productivity bottlenecks in the economy.

Economists have long suspected the Bank was targeting growth because inflation has been well above the 2pc target for the bulk of the past five years. The Bank has always been careful to stress its inflation-fighting credentials, though.

In a speech to the London Business School, Mr Broadbent said the statistical evidence proved the MPC had used growth throughout the past decade as a proxy for the future direction of inflation.

"UK monetary policy responded sensitively, immediately and more or less uniquely to actual growth in output," he said. "The reason, I believe, is that every acceleration in output was thought to represent a rise in output gap, signalling higher inflation risks, every drop in growth the opposite."

With the economy now suffering from a complex productivity problem, he argued that unemployment is a better gauge of how rapidly inflation will pick up.

He said: "The answer is to respond less sensitively to output and more to developments in the labour market, even if you have to wait for a while to see them. Changes in unemployment are now a more reliable measure of what's happening to the degree of slack in the economy than economic growth alone."

If unemployment falls more quickly that the Bank's latest forecast, "it would be right to ask whether we should think about withdrawing some of the monetary stimulus currently in place" by raising rates, he said. "If unemployment declines more slowly it would be right to leave the monetary stance unchanged for that much longer."

Markets currently reckon rates will start to rise in early 2015, about 18 months earlier than the Bank has signalled.

Mr Broadbent suggested they could be right. The rate at which unemployment falls will be "something the MPC, along with the rest of the world, will reassess over time".

He added that the UK's productivity problem, which means it now takes longer to produce something than six years ago, could be linked to the banks.

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Bank targeted growth for rate decisions, Ben Broadbent says

A Bank of England policymaker has admitted the widely-held belief that interest rates have been set in response to changes in growth rather than the official inflation mandate.

Tell us news not history.

Next he'll be admitting that they knew all about the Libor swindle all along as if that's an amazing revelation :rolleyes:

Edited by billybong

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He said: "The answer is to respond less sensitively to output and more to developments in the labour market, even if you have to wait for a while to see them. Changes in unemployment are now a more reliable measure of what's happening to the degree of slack in the economy than economic growth alone."

Well it might just be a measure of the amount of jobsworths non-jobs created along with the number of zero hour contracts etc but if they haven't even been following the written inflation remit then it's as good a measure to go by as any of the other phony measures they've all tried and failed with..

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The figures are all fiddled with anyway!

I bought a BOE satnav the other day. I plugged it in, and it told me I was leaving from the wrong place, then the speed of acceleration was greatly overestimated, and when I slowed down it didn't register at all! I ended up driving straight into a massive pile of shit!

FFS. :lol:

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I guess this will be another illegal act without consequence for those that acted and then lied about it. Merv gets a knighthood. A complete disgrace.

What do you mean, a knighthood? He's got a peerage! Lord King now.

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The Telegraph journo has mischaracterised what Broadbent said. All he's arguing is that monetary policy was being set using GDP growth as the principal indicator of inflationary pressures.

To give an analogy, if you're sailing a ship then you may use a compass reading in order to adjust course. In this sense you're targeting the compass reading, but only because the ultimate target is your port of call.

Broadbent's saying that the inflation mandate was the port of call and GDP growth was the compass.

Unfortunately the true message of this speech has been somewhat lost in this thread – in Broadbent's eyes things have changed and a strong recovery in output growth should not be sufficient evidence to prompt monetary tightening. Instead the unemployment rate should now be the compass.

It's all about expectations management. We're being primed to expect no tightening even if the economy takes off.

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inflation is essentially a slow default of debt.

the BOE realistically would like a spurt of medium inflation to reduce the debt in a stealthily fashion.

not too much to damage the economy, but higher than average to devalue current debts.

above normal inflation is the only realistic way to solve the debt problem.

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, if you're sailing a ship then you may use a compass reading in order to adjust course. In this sense you're targeting the compass reading, but only because the ultimate target is your port of call.

In reality the compass is targetting where you are pointing the ship, not the other way round.

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The problem was that using policies exactly like NGDP in the past always led the UK in the wrong direction - ending up in the wrong place. Whatever they tried they couldn't find their way.

At the same time many people had observed that some countries (most notably Germany) had relentlessly and successfully targeted low inflation (the compass?) and that discipline had been the main thing helping to finding their way (their successful economies).

They also noted that high inflation often claimed as used to achieve growth usually resulted in the devastation of economies (most notably Germany during Weimar but also the UK) and even helped to end in war such as Germany when they didn't control inflation.

Unfortunately the UK is reverting back to policies such as "pulling out the choke in the old MG" and like NGDP and look where that got the UK in the past. Deeper and deeper into *Carey Street.

*Carey Street - Euphemism for being bankrupt or in debt.

Edited by billybong

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From the telegraph link:

Economists have long suspected the Bank was targeting growth because inflation has been well above the 2pc target for the bulk of the past five years.

Inflation has been above target for most of the time since the BoE took over in 1997( when NuLabour gained power) and a lot of the time well above target - so that's about 16 years.

Even so they are right to point out "that inflation has been well above the 2pc target for the bulk of the past five years" which would be about 2 of the years under Labour and about 3 years under the Conservative/LibDem coalition.

Edited by billybong

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The figures are all fiddled with anyway!

I bought a BOE satnav the other day. I plugged it in, and it told me I was leaving from the wrong place, then the speed of acceleration was greatly overestimated, and when I slowed down it didn't register at all! I ended up driving straight into a massive pile of shit!

FFS. :lol:

.and when you drove into the massive pile of shit it told you it was 'unexpected!' :lol:

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Well it might just be a measure of the amount of jobsworths non-jobs created along with the number of zero hour contracts etc but if they haven't even been following the written inflation remit then it's as good a measure to go by as any of the other phony measures they've all tried and failed with..

This.

The unemployment figures look slightly better due to political fudging/non-jobs and more estate agents thanks to Gidiot's desperate bubble stoking.

GDP per capita is actually down 8% since 2008 so the vast majority are feeling the pinch and somebody somewhere is getting richer, but for some odd reason the wealth hasn't started to trickle down yet...

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inflation is essentially a slow default of debt.

the BOE realistically would like a spurt of medium inflation to reduce the debt in a stealthily fashion.

not too much to damage the economy, but higher than average to devalue current debts.

above normal inflation is the only realistic way to solve the debt problem.

As long as it sends wages up at least in line with inflation.It worked in the 70s and 80s simply because most wage increases every year were RPI+1%,2%.It was a given then your pay would go up with inflation and the only argument was how much over,,a bad year 0.5% over,,a good year 2% over etc.

Now pay is seems has de-coupled from inflation and is being cut in real terms every year.Grinding misery.

That is why inflation is making the debt problem worse for most people as they have less capital left to cover even the interest.

So inflation makes the debt less sustainable and so would interest rates going up.

Workers in this sort of globalist world should now be seeing deflation in goods to offset their none pay increases,and they would be if it wasn't for all the QE ,ZIRP etc.

The BOE is simply stealing from the poor,the working class and the middle class to give to the rentier/asset holding upper class.I don't know if that's the plan,or simply the way its working out.

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