Friday, June 13, 2014

Every percentage point on interest rates may well result in two percentage points on UKIP support

As if I haven't got more important things to do I have been sufficiently alarmed by Mark Carney's prognostications on interest rates to look up the text of his speech.

It is here (all twelve pages of it):

As you might expect, it is all gobbledygook full of clever-clever insider language designed to flatter his audience and give them a sense of exclusivity.

I have a degree from the University of London, post-graduate qualifications, read extensively and regularly attend seminars on economics - and yet I cannot see in this text any compelling reasons why interest rates need to go up.

No doubt pompous know-it-alls like Jonathan Portes and Jonathan Algar will say it's all in the small print.

But the fact remains I cannot see Mark Carney's reasoning - and nor I suspect will the people who are going to be on the receiving end of higher interest rates.

And yet it is we tax-payers who employ Mr Carney and it is to us he should be addressing his remarks, not those bloated (in every sense of the word) financiers he was talking to last night.

This is (so far as I can tell) the part of the speech where Mark Carney identifies cause and effect:

"The UK economy is currently unbalanced internally and externally.  Internally, there is wasteful spare capacity – an output gap – concentrated in the labour market. The Monetary Policy Committee (MPC) currently estimates this gap to be around 1-1½% of GDP, though we caution against false precision as there are wide confidence bands around this central view. The MPC’s current guidance makes clear that we will set monetary policy to meet the inflation target while using up that spare capacity. This has implications for the timing, pace and degree of Bank Rate increases. There’s already great speculation about the exact timing of the first rate hike and this decision is becoming more balanced. It could happen sooner than markets currently expect."

"...we will set monetary policy to meet the inflation target while using up that spare capacity"

Does this mean that monetary policy is going to be relaxed to increase inflation and that interest rates will have to go up to soak up the excess money that is causing the inflation?

That we are going to embark on a Keynesian merry-go-round to try to get some mythical accelerator principle working that might or might not prove to be beneficial?

And in the meantime millions of people who are struggling (and have been struggling for the last ten years) are going to be caused a lot of pain?  These are people who can BARELY pay their mortgages as it is.  These are people who have to borrow on credit cards to pay their grocery bills, rolling forward the debt and hoping they can remortgage at some point in the future just to keep their heads above water.

George Osborne and Mark Carney and Danny Alexander and the rest of the Treasury crew seem unaware of how evil their (and please don't think I am going all lefty - I realise the socialists would be even worse, but in a different way).

There are millions of people who are going to be caught up in this and they are going to be seriously pissed off.

To paraphrase John Dryden:  beware the anger of patient men.

Every percentage point on interest rates may well result in two percentage points on UKIP support.

PS did Mark Carney really use in his speech the phrase "...close coordination between all those in the boat; that is, between fiscal, monetary and prudential authorities" ?  Did he really use the word "prudential"?  Did no-one at the Bank of England explain to him that the idea of "prudence" has been done to death?  That the mantra of "prudence" is irredeemably associated with a gormless fucking idiot who lied to us for years and bungled the economy into recession?  Or are we expected to believe that "prudence" is back in vogue as a code-word used by Treasury fuckwits to describe anything they don't want us to understand?  Are we obliged to conclude from the use of this word that Mark Carney aspires to be Gordon Brown Mark 2 ?

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