September 5, 2008
My Opinion On The Bank Of England's Inflation Report
As Mervyn King said, "The British economy is going through a difficult and painful adjustment, and we're going to do f**k all to help!"
Well, he actually said the first part of that in reality, the second part was added by me as I felt that this is basically what he said with his full 50+ page inflation report.
He went on to say, "This adjustment cannot be avoided." Now, he is talking about a lot of things here, but one of these is stopping the country going into recession (that's rather important for those that are in some doubt)! So correct me if I'm wrong, but America did avoid this, just this year in fact, and are at least having a damn good go at staying out of it! Whereas he seems to think it's inevitable so let's lie down and take a good kicking.
But wait for it, the really good news is that he says that he sees this continuing until 2011…nice!
He thinks that despite there being a strong argument that inflation will actually go to the negative side of things next year and in fact therefore solve the problem for him, that it is actually better to ignore that possibility and not even include it on one of his 'fan' charts!
Side note:
Fan charts are supposed to be things that cover 90% of all possibilities, and yet even in his own report it shows the bank only gets it in the middle zone of its predictions a mere 50% of the time! What I didn't like was the report said that these figure were inconclusive to saying what the banks predictive skills were like. I think I can help them there, as if they are right 50% of the time then they are wrong 50% of the time too.
The funny thing is that they are actually right a lot less than 50% of the time, which means they would have more chance getting it right if they flipped a $X!£%$% coin! (I wanted to swear there, but restrained myself J).
Yes they really are that bad at it, they would get it right by using a coin more often!
After listening to him and reading the report I am certain that they want this to cause a slowdown and they want us (not them) to have this pain as they totally believe that it is necessary and for the greater good! I think Nixon actually thought what he was doing was for the greater good too; didn't stop him being misguided.
Mervyn said, "Next year will be a difficult one, then after a while what we can look forward to is a not so bad decade."
For those of us that are old enough to remember the recession Britain went through in the 90's, this may remind you of something that happened back then.
The good fight that the Bank of England and the ECB are fighting against inflation to the detriment of the economy could very well all be just a waste of time that actually keeps the economy in a recession for a lot longer than is necessary.
There are a lot of people quoting parallels between the US and the UK property market and citing Spain as a warning of what there is to come. There is also the declining market in Ireland which again, after its rapid price correction, is now not really much of a surprise that it overshot the mark. However, one real reason for this more recent slow down is detailed below.
In times of market rises and easy money all you have to do is be 'in' something to profit from it. However, I see some of the basic risks that the uneducated have gotten wrong which is why in times of uncertainty they seem in a rush to protect their money. Knee-jerk reactions of course are more than often the worst thing to do!











