BOE persistently wrong

JonnyBravo

Graham_Devon wrote: »

BUT, that does not really excuse some of the findings in the report, and it doesn't excuse some of the more obvious, somewhat, impossibly overly optimistic reports on growth and inflation.

The BOE have been stating for 4 long years that inflation will hit target. That's fine, but they didn't realign their stance with what was actually going on. If they had done that, instead of persistently insisting we would hit target, there would be no issue.

I'm absolutely convinced the BoE are more than happy to have inflation consistently slightly/a lot* above their target.
I'm convinced the Govt are happy with this too.
I don't think it's ever been spelt out explicitly, even in conversations behind closed doors, but the lack of action to correct their consistent lack of accuracy/action on this matter says all anyone needs to know. Both within the BoE and to the wider world.
I too think it's for the best. The sooner this debt is inflated away the sooner we can get on with piling up the next lot. We'll be there much sooner with inflation at 3-5% than if it was at 2%
Keep printing gets my vote.

* Depends on just how you view the world and whether you think silver is running out etc.

Graham_Devon

JonnyBravo wrote: »

I'm absolutely convinced the BoE are more than happy to have inflation consistently slightly/a lot* above their target.
I'm convinced the Govt are happy with this too.
I don't think it's ever been spelt out explicitly, even in conversations behind closed doors, but the lack of action to correct their consistent lack of accuracy/action on this matter says all anyone needs to know. Both within the BoE and to the wider world.
I too think it's for the best. The sooner this debt is inflated away the sooner we can get on with piling up the next lot. We'll be there much sooner with inflation at 3-5% than if it was at 2%
Keep printing gets my vote.

* Depends on just how you view the world and whether you think silver is running out etc.

Exactly why I feel that something will come out after Merv leaves.

He already appears to be somewhat publically speaking his own views, leading to contradictory information, such as what I laid out above on the dangers of QE, we can't take it much further (Mervyn speaking as himself), but then the next day stating they are poised to inject more (BOE speaking).

Mervyn is an extremely talented individual, and he can speak much sense when speaking as himself. But whenever something comes from the BOE, it seems to contradict what's he's stated.

Telling, is the fact that no politician will take on the BOE. All they will do (all parties) is take credit for the forecast's, setting "easier" budgets and telling the nation the forecast is due to their policies, but as soon as it's wrong, the BOE are independant.

wotsthat

Graham_Devon wrote: »

Telling, is the fact that no politician will take on the BOE. All they will do (all parties) is take credit for the forecast's, setting "easier" budgets and telling the nation the forecast is due to their policies, but as soon as it's wrong, the BOE are independant.

All forecasts should be taken with a pinch of salt and I'm sure that the government when forming policy do exactly that.

Not sure how concerned we need to be about this - the difference between the BoE and their peers is 'marginal' so probably there's probably no significant difference.

I don't see any contradiction in pointing out the dangers of QE whilst not ruling out the possibility of further QE either.

thor

MacMickster wrote: »

Economists are given the status of scientists, when they are merely artists painting a picture which is no more than an illusion.

Could not have said it better myself. Economists are fraudulently making a living pedaling a bogus science. They have successfully convinced everyone that they are in a high flying respectable job but if they can't make accurate predictions then what's the point of them? They are no better than dole scroungers or tax evaders.

paso11

JonnyBravo wrote: »

I'm absolutely convinced the BoE are more than happy to have inflation consistently slightly/a lot* above their target.
I'm convinced the Govt are happy with this too.
I don't think it's ever been spelt out explicitly, even in conversations behind closed doors, but the lack of action to correct their consistent lack of accuracy/action on this matter says all anyone needs to know. Both within the BoE and to the wider world.
I too think it's for the best. The sooner this debt is inflated away the sooner we can get on with piling up the next lot. We'll be there much sooner with inflation at 3-5% than if it was at 2%
Keep printing gets my vote.

* Depends on just how you view the world and whether you think silver is running out etc.

What about the effect of inflation on peoples savings and retirees on fixed incomes?

Inflation is a back door tax and is regressive

PaulF81

Graham_Devon wrote: »

This is about growth and inflation forecasts, not interest rates.

What would the boe's policy response be if inflation was forecast higher? Interest rate rises and no QE, both unacceptable to the bank as this would risk stability. Better to frig the model IMHO.

PaulF81

paso11 wrote: »

What about the effect of inflation on peoples savings and retirees on fixed incomes?

Inflation is a back door tax and is regressive

The BOE are trying to stimulate spending. How is saving compatible with this? Their other option would be to invest savings tax efficiently in a ftse250 tracker or go for a growth model investing much needing cash in British high tech manufacturing.

The fact savings (in terms of stowed cash in the bank) ae getting hammered is down to the idiocy of savers who refuse to invest, not the Bank of England.

paso11

First lets remember that saving represents deferred consumption and borrowing to spend is effectively accelerated consumption.

Interest rates are a signaling mechanism and low rates, if determined by the market, should indicate that people are deferring consumption (high savings) and hence signal to businesses to invest for future growth in order to meet pent up demand from the deferred consumption.

Our low interest rates as manipulated by the BOE are trying to encourage investment except people are not really deferring consumption, they are paying down debt thereby creating a false signal for businesses.

In other words we are planting the seeds for the next crisis.

If in the decade before the crisis much of the consumption was debt driven then surely it has to be paid back at some point- meaning a stagnant economy for some time.

We keep focusing on the recession/weak economy as the problem when its actually what happened before that was the real problem. This is the purging cleanse- think chemo therapy. Until households reduce down debt levels I don't really see how we can get a significant uplift in spending.

This view is clearly incompatible with the idea of perpetual growth

Loughton_Monkey

PaulF81 wrote: »

The BOE are trying to stimulate spending. How is saving compatible with this? Their other option would be to invest savings tax efficiently in a ftse250 tracker or go for a growth model investing much needing cash in British high tech manufacturing.

The fact savings (in terms of stowed cash in the bank) ae getting hammered is down to the idiocy of savers who refuse to invest, not the Bank of England.

Some misconception surely?

If I want to buy FTSE shares (or any derivative backed by them), then I can only buy them from a "disinvestor". Apart from the occasional 'rights offer' etc. the number of shares is fixed. We can all rush in buying/selling them but neither action adds a penny to "investment" in British Business.

It is indeed the savers who are (theoretically) the ones to save the day, by providing extra money to banks to lend out. Partly mortgages, and partly to small business.

THe fact that banks are hoarding rather than 'investing' could be the issue.

Loughton_Monkey

paso11 wrote: »

.....We keep focusing on the recession/weak economy as the problem when its actually what happened before that was the real problem. This is the purging cleanse- think chemo therapy. Until households reduce down debt levels I don't really see how we can get a significant uplift in spending.

This view is clearly incompatible with the idea of perpetual growth

I tend to agree.

There is no doubt whatsoever that this recession was caused by a long build-up of 'hyperdebt' both at household and government level. Households and government are both trying (with only marginal success so far it seems) to pay off debt and get back to 'square 1'.

The dilemma is that this is impossible without much lower spending by households. Government gets its income very largely by skimming off "circulation" [i.e. spending, wages,.... the main components of GDP].

Hence, public spending should have gone down by a huge amount just to match it with income to stop the debt rising. And then on top of that, it should come down by a massive amount simply because income has taken a dive. Huge + Massive = Drastic cuts. What we are seeing, though, is piddling, insignificant spending cuts, just starting to come through 5 years into the recession.

I perceive it as coming home from work to tell your wife that not only have you reached your max credit card limit, but your salary is being cut by 10% from next week, and saying "that means the new car we bought last year will have to last 10 years instead of 5...."

The correct action, for this guy and for the government is to slash spending, now by 15%/25%. Get real!