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Bank’s Credibility Gap Over ‘true’ Measure Of Inflation

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http://business.timesonline.co.uk/article/...2340136,00.html

"

Now, however, the Bank faces a problem, arguably its most serious yet. There are doubts, not just about its ability to control inflation in future, but if it is under control now. Those doubts stem from scepticism about whether the consumer prices index (CPI), the Bank’s target inflation measure, accurately reflects people’s genuine experiences.

This is a serious matter, as Bank insiders are aware. If people stop believing the inflation numbers, the credibility of monetary policy suffers. That could begin the slippery slope to economic anarchy

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http://business.timesonline.co.uk/article/...2340136,00.html

"

Now, however, the Bank faces a problem, arguably its most serious yet. There are doubts, not just about its ability to control inflation in future, but if it is under control now. Those doubts stem from scepticism about whether the consumer prices index (CPI), the Bank’s target inflation measure, accurately reflects people’s genuine experiences.

This is a serious matter, as Bank insiders are aware. If people stop believing the inflation numbers, the credibility of monetary policy suffers. That could begin the slippery slope to economic anarchy

"

Not really the banks fault, IMO. They are given the measure by the ONS and if I am right, he target is set by Mr Brown. But CPI does seem to have this nod, nod, wink, wink effect about it. I think many think it's suspect at best and did think so when it was introduced. Isn't diddling the inflation measure a classic hoodwink that governments do when they try to re-inflate an economy?

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Isn't diddling the inflation measure a classic hoodwink that governments do when they try to re-inflate an economy?

The first thing an independent bank should be aware of.

Bottom line is this - they have the M4 figures, they know that they are flooding the market with trash funds, they have thus actively participated in the debt/housing bubble. There is NO excuse. They have been given the mandate of maintaiing financial stability too, don't hear many prognostications about that do you? Likewise you never hear any mention of the trade deficit.

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Isn't diddling the inflation measure a classic hoodwink that governments do when they try to re-inflate an economy?

The first thing an independent bank should be aware of.

Bottom line is this - they have the M4 figures, they know that they are flooding the market with trash funds, they have thus actively participated in the debt/housing bubble. There is NO excuse. They have been given the mandate of maintaiing financial stability too, don't hear many prognostications about that do you? Likewise you never hear any mention of the trade deficit.

Surely financial stability includes not plunging the country into recession?

So *that's* who the govt will blame!

They'll say the bank being independent hasn't worked and bring it back under their control.

The economy is still strong, they ain't gonna be blaming anyone for a while yet.

;)

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Surely financial stability includes not plunging the country into recession?

Recessions are part of the normal business cycle. They are in some ways necessary to prevent potenitally economy-damaging excess, speculation and malinvestment becoming the norm and threatening at some later stage some far worse fallout.

Of course recessions are politically damaging for the incumbent govt.

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I'm concerened that so many of these "CPI credibility" stories are now appearing in traditional New Labour mouthpiece media, ie Times/Sunday Times.

I suspect a Treasury spin operation going on, whereby Brown [who introduced CPI measure at Blair's request] can introduce a new inflation measure, and a subsequent new target.

Classic smoke & mirrors, classic New Labour.

Edited by jp1

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Isn't diddling the inflation measure a classic hoodwink that governments do when they try to re-inflate an economy?

The first thing an independent bank should be aware of.

Bottom line is this - they have the M4 figures, they know that they are flooding the market with trash funds, they have thus actively participated in the debt/housing bubble. There is NO excuse. They have been given the mandate of maintaiing financial stability too, don't hear many prognostications about that do you? Likewise you never hear any mention of the trade deficit.

Given that Gordon has been flooding the economy with Moneyto keep the consumer debt bubble inflated (M4 up 13%) its a wonder that sterling continues to rise as there must be a large downside risk at some point? The US are in virtually the same boat although their per capita debt is much lower ($23k compared with our $39k) and their currency is down 10-20% against the majors.

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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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