Saturday, February 06, 2016

Bank of England and its own cartoon

The Resolution Foundation has published this image using Bank of England statements and data over the past 7 years: 

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It shows how the BoE expected its bank rate to rise following the date of its forecasts over the years, according to the reading of the economic runes at the time. Clearly the Bank does not know what is happening as it wiggles various monetary levers, squeezes prudential brakes and holds enigmatic press conferences. Yet it still continues to issue rising interest rate forecasts just as it has since the credit crisis of 2008 when rates dropped off a cliff and resolutely stayed there. 
  
This simple graph is as funny as an artist's cartoon. It combines a hilarious reminder of nearly a decade of economic forecasting with a pathetic illustration that the Old Lady of Threadneedle Street is the Emperor Who Has No Clothes. 

One symptom of the above very low interest rates is galloping house prices which is a likely herald of another general economic crisis ahead bringing renewed financial difficulties for many. Will the Bank or the Chancellor, or both...or enough other people ...anybody! please!... summon humility and call for a general discussion of what to do next?  Time is short and we should not wait for the crisis to hit. Anyone reading The Free Lunch blogs will be aware there are eminent people whose untried ideas deserve examination. For example: Lord Turner, Prof Richard Werner, Prof Steve Keen, Lord Skidelsky, Fred Harrison, Richard Spencer,  Prof Mariana Mazzucato, Prof Michael Hudson, Ann Pettifor and many other distinguished champions of economics for the common good.    

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