Bank of England upgrades economic growth forecasts

michaels

But perhaps because we were spending more than we were earning a fall in real wages was innevitable. The options were a fall in real wages and stable prices = good news for savers or real wages stay the same whilst prices increase = good news for borrowers.

Except these are not a mirror image as the former would likely to have led to borrower and then bank defaults resulting in savers not getting their capital back at all (and don't tell me 85k is govt backed, the gov, ie taxpayers could not have bailed out banks the size of the UKs).

So the real choice was savers take a small hit from inflation and real GDP stands still or savers take a huge hit through default and real GDP plummets due to the dislocation of bank failure.

What are the advantages of the former over the latter?

wotsthat

ILW wrote: »

I believe that missing target once a twice is a minor glitch. Missing it month on month for 4 years is a failure.

Its not only savers cash that is being devalued, it is wages as well. If you came up with a total figure of how much wages had been devalued it would be massive.

I tend to use 1% either side in my personal pension forecasting (usually target 3.5% on the upside to be on the safe side). Seems sensible because it's not until +/- 1% that it's deemed serious enough for the governor to have to take the drastic action of writing to No. 11.

It seems a lot of effort to get irate about the difference between 2.0% and 2.8% inflation.

ILW

michaels wrote: »

But perhaps because we were spending more than we were earning a fall in real wages was innevitable. The options were a fall in real wages and stable prices = good news for savers or real wages stay the same whilst prices increase = good news for borrowers.

Except these are not a mirror image as the former would likely to have led to borrower and then bank defaults resulting in savers not getting their capital back at all (and don't tell me 85k is govt backed, the gov, ie taxpayers could not have bailed out banks the size of the UKs).

So the real choice was savers take a small hit from inflation and real GDP stands still or savers take a huge hit through default and real GDP plummets due to the dislocation of bank failure.

What are the advantages of the former over the latter?

Or third choice is near zero inflation - fair news for borrowers and savers.

wotsthat

Graham_Devon wrote: »

You are arguing that the people who got it right are wrong, and the people who got it wrong are right. It's not going to wash.

What's quite amusing is that you've been waffling on about inflation since QE started in 2009. I reckon you would have given short shrift to anyone that said inflation would average 3% for the following 4 years - maybe mentioned rosy tints?

Graham_Devon

wotsthat wrote: »

What's quite amusing is that you've been waffling on about inflation since QE started in 2009. I reckon you would have given short shrift to anyone that said inflation would average 3% for the following 4 years - maybe mentioned rosy tints?

Oh NOW you are happy to look at the average.

We've moved on from your cherry picked data from this month!?

It's a funny thing for you to try and have a pop at me with though. Inflation was over 5%. That;s the inflation I was talking about.

What I said, did actually happen. You are just massaging it with the average. To get an average of 3%, you have to have a period of inflation being above 3%.

ILW

wotsthat wrote: »

What's quite amusing is that you've been waffling on about inflation since QE started in 2009. I reckon you would have given short shrift to anyone that said inflation would average 3% for the following 4 years - maybe mentioned rosy tints?

So 3% over 4 years I guess would be compounded at around 14%.
Do most people realise that their wages and savings are worth 14% less than if inflation had been averaging 0%? We could all have been 14% richer.

wotsthat

Graham_Devon wrote: »

Oh NOW you are happy to look at the average.

We've moved on from your cherry picked data from this month!?

It's a funny thing for you to try and have a pop at me with though. Inflation was over 5%. That;s the inflation I was talking about.

What I said, did actually happen. You are just massaging it with the average. To get an average of 3%, you have to have a period of inflation being above 3%.

I bet the peak of 5% was less than you expected too.

2.8% is hardly cherry picked if the average since merv is 3.2% and 2.1% is the average since a target was introduced - inflation has been pretty flat for 20 years.

5% sounds more like cherry picking - how many months has it been above 5% in the last 20 years.

Mr._Pricklepants

I'm grabbing a chair....Graham and percentages....should be good....

Kennyboy66

ILW wrote: »

Or to put it another way:

"Kings failure to keep to inflation target costs UK savers an additional £32 billion pounds in one year alone".

seems somewhat fanciful considering the £4 trillion number you quoted includes shares held directly and in pensions not to mention gilts and bonds.

Are you suggesting that higher interest rates would increase the value of shares ?

wotsthat

ILW wrote: »

So 3% over 4 years I guess would be compounded at around 14%.
Do most people realise that their wages and savings are worth 14% less than if inflation had been averaging 0%? We could all have been 14% richer.

I don't know if most people realise that it's the governments intention to devalue savings and earnings every year but there is a clue. All governments of the last 20 years have a stated policy for such a thing to happen and it's mentioned at least monthly on all mainstream news. Strangely it's a policy that every government achieves with merit.

Best to react to the realities rather than hope this policy will change anytime soon.