It is Obvious

Chris Rick has got altogether too much to say

I’m walking backwards for Christmas

Posted by chrisrick13 on November 14, 2013

It is obvious: it’s not over

I love ice-hockey.  I hate it as well.  It is physical.  It is fast.  It is exciting.  And you can’t see the damn puck!  Frenetic action, bodies everywhere then they all throw their hands in the air and skate off.  After a careful search you can see a little black dot partially obscured on the floor next to the net.  Only a couple of minutes of slow motion replay lets you see the full story.  Don’t know why anyone bothers going to a game.  What I really like from the skill perspective is the defenders who can skate backwards as fast as the attacking players going forwards.  It is amazing.

I see backwards movement every day done with great skill.  I thought that the forward guidance on interest rates was action as unemployment passed 7%.  Not backwards skating but it is action only to be considered when the rate goes below 7%.  How much below?  How long for?  Maybe action will be taken at 6.5%?  So why not say it?  The answer is obvious…because they don’t want to be tied to a number.  So why fly 7%?  Forward guidance is supposed to stabilise things with certainty.  The markets are moving independently of the guidance.  How does it stabilise things when the BoE says that it thought it would happen in 2016 but has now brought that date forward to 2014?  Maybe it will push it out next month.  Is that stability.

So my prediction is that the 7% target will be moved before it occurs.  It is a good job that the people who it matters to are ignoring it.

What bothers me about the 7% is the accuracy of the measure.  I have had enough trouble getting and keeping myself on the unemployed list so I know there is huge pressure to cut that unemployment number.  Everyone is aware of that.  So the BoE is going to base its strategy on a number that is at best ‘leant on’ and is actually fiddled.

Even if it is correct, what does it measure that has some bearing on interest rates.  If 100,000 move to part-time working and 100,000 unemployed take up the slack then nothing much has changed in the economy.  Unemployment drops by 2 points though.  So I would like to find out what the governor thinks this number is signalling to him?

I wrote about lucky generals in the last blog.  Maybe after Canada and now the UK Carney is a lucky general.  Alas, I do not think so.

It is obvious: it’s not over until the fat lady laces up her skates up

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