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“We got it wrong.” That’s what Sir Mervyn King told the House of Commons’ Treasury Select Committee as he was testifying at a hearing on the Bank of England’s November Inflation Report. No wonder the UK banking system is in such disarray. The bloody Bank of England doesn’t know what it is doing either.
I had to spend an hour and a half banging my head against my office wall this morning after I read Sir Mervyn’s comment that “There are time when you debate something and you finally decide, well look, this judgment really has to change now.” Are you kidding me?
King was referring to why the bank’s Monetary Policy Committee (MPC) failed to miserably in forecasting the performance of the UK economy by continuously publishing opinions that indicated a high degree of economic growth for this year.
King responded, “Looking back, I think we wish we had not done that in earlier Inflation Reports, but there comes a point where you say, ‘We really are no pretty convinced that it doesn’t make sense.'”
Allow me, if you will, to translate into ENGLISH what King meant by his politically correct balderdash. Translation: “We were pretty certain that the economy was not going to recover. We’ve been pretty certain for some time now, but, collectively, we thought that if we reported what we really projected it would cause businesses and citizens to tighten their budgets and the economy would suffer as a result. If, on the other hand, we issue a positive forecast, we might actually stimulate the economy.”
In addition to the translation, I offer you a probable conversation in the committee room: “Gentlemen, we can’t possibly tell the public what we foresee. There will be panic in the streets. The whole system could crash.”
There you have it. Right here in the UK. Right here in the Bank of England. Right here in the Monetary Policy Committee. “It will be better to lie than to tell the truth.” The mission of the MPC has shifted from telling the truth to preserving the domestic peace.
Sir Mervyn, you can deny it all you wish, but there is nothing else that makes any sense. There was no other reason to enter into an internal debate to publish projections that have no foundation in fact and that you don’t even believe. Your projections were pure poppycock. And you knew it! But you also knew that if and when the manure hit the ventilator, all you would have to do is glibly humble yourself and say, “We made a mistake.”
Let me make it abundantly clear. Projecting the economy is very difficult; perhaps even impossible. We respect that. Not only is it impossible to accurately predict what may happen tomorrow, we don’t even have the promise of tomorrow. Every company prospectus includes some jargon telling the reader not to rely on past results as an indicator of future performance. We empathise with you. All we ask is STOP LYING TO US!
As my British grandfather would say, “What a bunch of nincompoops!”
