Negligent, Incompetent Moron Mervyn King wrong yet again

Generali

Fella wrote: »

Good article on King here BTW:

http://www.cityam.com/latest-news/allister-heath/mervyn-king-should-have-hiked-rates-deflate-the-bubble

It is a good article, albeit one that misses the fact that it was the FSA rather than the BoE that was responsible for ensuring that banks were and could remain solvent.

You undermine your own argument however: if the MPC should increase base rates despite economic weakness to rein in inflation then why shouldn't they keep rates quite low to rein in a bubble whilst inflation is low?

You can't have it both ways and that's why I think these criticisms are unfair.

That's before we get to the fact that being chairman of the MPC is a small part of Merv's job.

Fella

Generali wrote: »

You undermine your own argument however: if the MPC should increase base rates despite economic weakness to rein in inflation then why shouldn't they keep rates quite low to rein in a bubble whilst inflation is low?

? Keeping rates low does nothing to rein in a house price bubble? Quite the opposite which is part of my point.

grizzly1911

Generali wrote: »

That's a great analogy. You kinda know the direction and you most certainly know what you're trying to do but hitting mark is very hard.

Another would be like trying to do the Chinese football pools!

I wonder if his pay is performance linked?

Wonder if the target would have been more accurately set, giving leeway to achieve?

grizzly1911

ILW wrote: »

But getting the inflation projections wrong by around 50 to 100% on something like 40 occassions (months) and always in the same direction, does not inspire confidence.

That is separate from just failing to hit set targets.

If he had been in the betting industry, he would have been out on his ear for failure.

He reminds me of a Programme DIrector in a previous life who would routinely be trundled out to say the project was on course and would deliver whilst everybody in the Programme knew it wasn't going to happen.

After a while the audience lose patience.I am surprised that he keeps on saying the same thing and has various new excuses all the time.

Not long till he picks up his pension. No doubt politically easier to let him just ride off into the sunset.

Generali

Fella wrote: »

? Keeping rates low does nothing to rein in a house price bubble? Quite the opposite which is part of my point.

No, my point is that you can use interest rates to target inflation or house prices but if they are moving in opposite directions then you have to make a choice. If house prices are rising but inflation is within what you seem to think is a target range, why increase rates if inflation targeting is your aim?

System

Not so long ago, when the BOE thought everything was nicely under control, the Governor would "write a letter" to the chancellor, and the ship would be nudged back on course again.
We don't seem to hear very much about him writing letters any more - has he run out of ink, or did he realise nobody was reading them?

Generali

Clifford_Pope wrote: »

Not so long ago, when the BOE thought everything was nicely under control, the Governor would "write a letter" to the chancellor, and the ship would be nudged back on course again.
We don't seem to hear very much about him writing letters any more - has he run out of ink, or did he realise nobody was reading them?

The rules remain the same.

If the CPI is more or less than 1% from the 2% target for CPI then the Chairman of the MPC (also the Chairman of the BoE) has to write a letter of explanation to the Chancellor.

That's not the same thing as saying that the CPI has to be within 1-3% or else Merv has failed of course.

ILW

Generali wrote: »

The rules remain the same.

If the CPI is more or less than 1% from the 2% target for CPI then the Chairman of the MPC (also the Chairman of the BoE) has to write a letter of explanation to the Chancellor.

That's not the same thing as saying that the CPI has to be within 1-3% or else Merv has failed of course.

Many would say it is.

Unless it is one of them targets that are set for public servants where they never actually fail to meet them, just move the parameters a bit.

Fella

Generali wrote: »

No, my point is that you can use interest rates to target inflation or house prices but if they are moving in opposite directions then you have to make a choice. If house prices are rising but inflation is within what you seem to think is a target range, why increase rates if inflation targeting is your aim?

Ah I see what you're getting at. What I'm saying is that there were often times during the house price boom when King & the MPC kept IRs artificially low claiming that they had to because of how much "inflation was going to fall over the next xx months". (Exactly as they still do in fact). Then as now they were repeatedly wrong, meaning they failed on both counts, fuelling the house price boom AND allowing inflation to overshoot it's target.

So we had a situation whereby timely rate rises would have served both purposes: reigned in the house price boom & kept inflation within it's target range. But King has continually used any & every excuse to keep rates low. As has been said before, when inflation is low he cites that as the reason to keep IRs low. When inflation is high he cites "future low inflation that's on the way" as the reason to keep IRs low. And when that future low inflation fails to materialise, he simply pushes the date of his prediction ever further out.

A disgrace of a man IMO.

PaulF81

suck it up. whining on a forum int going to change anything. neither is hoarding cash, gold or silver. we are being fed a sh@t sandwich and we all have to take a bite i am afraid.

dont like it? emmigrate, or get a better paid job.