Sunday, February 19, 2012
Little grey cells
On 25th October last I thought to keep the grey cells ticking over by taking a look at a DoE consultation document about a new approach to special educational needs and disability. This week it is the turn of a rather elderly Bank of England report about inflation. Or to be more precise, from August 2011.
It all started off rather well. I decided that I did not want to print the thing off myself, or get the local print shop to do it. Rather I would get the real thing. To which end I phone up the Bank and speak to a very helpful young man who for the very modest sum of £3 gets the thing in the post later that afternoon and with me not much more than 24 hours later. The thing turns out to be a handsomely designed and produced booklet of some 50 pages, only marred by the bottom corner of the contents page having been caught in a mangle at some point.
But then I start to read the thing, and the going starts to get heavier.
There were lots of charts. Some of them looked quite pretty, but many of them were more or less incomprehensible - and that to someone who was reasonably numerate and used to know something about economics. Presumably the intended audience is professional economists who might be expected to understand this sort of stuff - rather than the general reader or a politician. But I offer two comments. First, the things that the charts were displaying were quite often quite complicated artefacts, subject to all kinds of issues of data and definition. One was not at all confident that the authors of the report were not being too clever by half. Second, a lot of the charts when in for giving spread forecasts with probabilities attached to them. Which all sounded very scientific but left me with the feeling that the forecasters have not actually got a very strong grip on l'actualité.
I trundled fairly briskly through the five sections on money & asset prices, demand, output & supply, costs & prices and the prospects for inflation. And while I could understand quite a lot of it, taken a sentence at a time, not all that much sank in. I now know that credit for big companies is not too bad but that for small companies is still tight. That demand is pretty feeble. That there is a lot of slack in the employment market. And that the prices of imported commodities have risen a lot over the last year. And that is about it. No big picture.
So I do not pretend to understand the policy decision to hold the bank rate at 0.5% and the stock of asset purchases at £200 billion. As far as I could make out the high inflation was the product of high import prices, particularly high energy prices, somewhat mitigated by weak growth in wages. So how does the policy decision bear on high import prices?
But I do pretend to wonder whether there would not be room for a shorter and easier document which would be a bit more accessible? But which maintained the standard of design and production of this one. This is all important stuff and the more of us who understand something of what our leaders are up to the better.
Also whether our economic policy should revolve around keeping inflation at around 2%. Don't we have other problems at the moment? And anyway, if external forces push inflation up to around 10% what on earth can we do about it? Might it not be a good idea to drive down import led consumption with a bit of price inflation? A contribution towards living within our means?
It all started off rather well. I decided that I did not want to print the thing off myself, or get the local print shop to do it. Rather I would get the real thing. To which end I phone up the Bank and speak to a very helpful young man who for the very modest sum of £3 gets the thing in the post later that afternoon and with me not much more than 24 hours later. The thing turns out to be a handsomely designed and produced booklet of some 50 pages, only marred by the bottom corner of the contents page having been caught in a mangle at some point.
But then I start to read the thing, and the going starts to get heavier.
There were lots of charts. Some of them looked quite pretty, but many of them were more or less incomprehensible - and that to someone who was reasonably numerate and used to know something about economics. Presumably the intended audience is professional economists who might be expected to understand this sort of stuff - rather than the general reader or a politician. But I offer two comments. First, the things that the charts were displaying were quite often quite complicated artefacts, subject to all kinds of issues of data and definition. One was not at all confident that the authors of the report were not being too clever by half. Second, a lot of the charts when in for giving spread forecasts with probabilities attached to them. Which all sounded very scientific but left me with the feeling that the forecasters have not actually got a very strong grip on l'actualité.
I trundled fairly briskly through the five sections on money & asset prices, demand, output & supply, costs & prices and the prospects for inflation. And while I could understand quite a lot of it, taken a sentence at a time, not all that much sank in. I now know that credit for big companies is not too bad but that for small companies is still tight. That demand is pretty feeble. That there is a lot of slack in the employment market. And that the prices of imported commodities have risen a lot over the last year. And that is about it. No big picture.
So I do not pretend to understand the policy decision to hold the bank rate at 0.5% and the stock of asset purchases at £200 billion. As far as I could make out the high inflation was the product of high import prices, particularly high energy prices, somewhat mitigated by weak growth in wages. So how does the policy decision bear on high import prices?
But I do pretend to wonder whether there would not be room for a shorter and easier document which would be a bit more accessible? But which maintained the standard of design and production of this one. This is all important stuff and the more of us who understand something of what our leaders are up to the better.
Also whether our economic policy should revolve around keeping inflation at around 2%. Don't we have other problems at the moment? And anyway, if external forces push inflation up to around 10% what on earth can we do about it? Might it not be a good idea to drive down import led consumption with a bit of price inflation? A contribution towards living within our means?
# posted by Jim @ 12:46 PM 
