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Why 95% of Traders Fail

Delusional Mark Carney Claims Success for Bank of England's Worthless BrExit Forecasts

Interest-Rates / BrExit Sep 08, 2016 - 06:49 AM GMT

By: Nadeem_Walayat

Interest-Rates

Britain's very own Tyrion Lanister, The Master of Coin, migrant banker Mark Carney, Governor of the Bank of England stepped forward Wednesday to claim success both for Banks dire forecasts of economic doom, a technical recession in store for the UK economy should Brexit happen AND now also for subsequent surprisingly strong performance of the UK economy that has seen record numbers across several economic measures such as the Purchasing Managers Index (PMI) for August recording its largest jump in its 25 year history, or that the house price crash of 18% has failed to materialise, or that new car sales have leapt 3% against a year ago which is a sign of consumer confidence.


As an example pre-Brexit Mark Carney and the Bank of England warned -

"the elephant in the room that would mean a materially lower path for growth and a notably higher path for inflation. The pound could fall sharply following a vote to leave, pushing up inflation as imports became more expensive. Although a weaker pound would boost exports, this would not offset the damage inflicted by Brexit, as higher inflation hits incomes and living standards.

A vote to leave the EU could have material effects on the exchange rate, demand and supply potential. The consequences could possibly include a technical recession."

Whilst the Bank of England MPC warned : The most significant risks to the MPC’s forecast concern the referendum. A vote to leave the EU could materially alter the outlook for output and inflation, and therefore the appropriate setting of monetary policy. Households could defer consumption and firms delay investment, lowering labour demand and causing unemployment to rise. At the same time, supply growth is likely to be lower over the forecast period, reflecting slower capital accumulation and the need to reallocate resources. Sterling is also likely to depreciate further, perhaps sharply. This combination of influences on demand, supply and the exchange rate could lead to a materially lower path for growth and a notably higher path for inflation than in the central projections set out in the May Inflation Report. In such circumstances, the MPC would face a trade-off between stabilising inflation on the one hand and output and employment on the other. The implications for the direction of monetary policy will depend on the relative magnitudes of the demand, supply and exchange rate effects. Whatever the outcome of the referendum and its consequences, the MPC will take whatever action is needed to ensure that inflation expectations remain well anchored and inflation returns to the target over the appropriate horizon.

This allowed David Cameron and George Osborne to feed on the Bank of England's prophecies of doom in an attempt to scare the British people into voting REMAIN.

“Almost everyone now agrees, from the Governor of the Bank of England to the IMF, the OECD to the Treasury, 9 in 10 economists to, yes, even some Leave campaigners, there would be an economic shock if we left Europe. Let’s be clear what that means. The pound falling, prices rising, house prices collapsing, mortgage rates increasing, businesses going bust, and unemployment going up. In other words, a recession.”
- David Cameron

“If we leave the European Union there will be an immediate economic shock that will hit financial markets... That affects the value of people’s homes and the Treasury analysis shows that there would be a hit to the value of people’s homes by at least 10 per cent and up to 18 per cent." - George Osborne

Meanwhile my video of Mid May painted a colourful picture of what would turn out to be far closer to reality of what to expect Brexit morning, effectively a FREEDOM dividend -

https://youtu.be/rQWHG3zV6eU

And now post Brexit Instead of the UK economy collapsing into a technical recession as the Bank of England has prophesied, the UK economy is outperforming virtually all of europe and literally experienced a mini boom during August that looks set to continue during September, which Mark Carney now is apparently delusionally claiming success for!

"The Bank and the Monetary Policy Committee (MPC) helped to support, cushion and help the economy to adjust, as the pro-Brexit result was a surprise to financial markets,"

"In light of all the events since the referendum, I'm absolutely serene about the comments made both by the monetary policy committee and the financial policy committee,"

"The market events, the liquidity pressures that were met because of the contingency measures that were taken absolutely validated the steps that we and other central banks took."

"Part of the recovery in sentiment was because the bank took timely, comprehensive and concrete action and that action has had an impact”.

The problem is this that Mark Carney is now effectively saying that he KNEW before the referendum vote that the Banks doom forecasts peddled so as to scare the British people in to voting to REMAIN would NOT happen because of measures the Bank of England had planned to undertake post Brexit, such as £170 billion of money printing and the August interest rate cut. Which in reality given the strong August bounce was a clueless Bank of England hitting the PANIC button early August! Cutting interest rates from 0.5% to 0.25% and printing £170 billion pounds to stuff into the big banks is a PANIC move!

Therefore he is effectively admitting that the forecasts were FALSE because the Bank of England apparently would act to counteract them so that they would NOT materialise which IS the message that the Bank of England should have given if they were not engaged in economic propaganda for the REMAIN camp i.e. They should have said not to worry as whatever happens the BoE would stimulate the economy so that Brexit would have no immediate economic consequences. Though of course BrExit has not actually happened yet!

This is just the latest example of what I have been repeatedly warning of for a decade that the Bank of England's forecasts are nothing more than economic propaganda for the gullible masses. For example what I wrote 6 years ago is just as valid today as it was then.

15th Nov 2010 - Bank of England Inflation Propaganda Suggests Invisible Depression

Bank of England's Inflation Propaganda

Whilst the mainstream press laps up the latest inflation report, according to the Bank of England's forecast for UK inflation as of Feb 2010, CPI inflation by September should have fallen to about 1.4%, instead it is at 3.1% (see graph), with the forecast for inflation to fall to below 1% by the end of 2010 and magically always converge towards a sub 2% target in two years time which fails to occur 96% of the time.

Clearly the Bank of England relies on the gold fish memory of the mainstream press as the BoE seeks to revise inflation forecasts every quarter to always push forward sub 2% to two years forward, which is nearly always preceded by a trend to below 2% one year forward. But as mentioned above the quarterly inflation reports are just propaganda aimed at psychologically managing the populations expectations on the economy and inflation in the direction where the BoE wants it to be as the alternative would be to make the BoE's job harder.

For instance if the Bank of England stated that Inflation would be 6% during 2011 then that would ignite a wage price spiral that would make the Bank of England's job at controlling inflation significantly harder, therefore it is much more convenient for the Bank of England to be deliberately wrong in its inflation forecast than to accurately publicise probable inflation expectations. For instance if the Bank of England was not expecting high inflation during 2010 and beyond then why did the Bank of England staff pension fund switched from being 30% invested in inflation index linked government bonds to 70% during late 2009 ?

More here - The Real Reason for Bank of England's Worthless CPI Inflation Forecasts

Also see my most recent video analysis of the UK economy for more on the Bank of England's prophecies of doom against that which has subsequently transpired as well as GDP forecasts for 2016 and 2017:

https://youtu.be/eGrotHF75Ec

For more on the prospects for post Brexit britain see my following two in depth pieces of analysis that are likely to increasingly become manifest.

And watch the following video of what actually happened on BrExit night that caught virtually ALL by surprise as illustrated by my selection of the highlights from 8 hours of BBC coverage of the EU Referendum result.

Also see the second video on trading markets during brexit night that illustrates how all hell broke lose once the polls closed Thursday 23rd June, triggering a sharp rally in sterling and FTSE futures that was sustained until the actual results started to be announced shortly after midnight triggering a 5 hour market panic.

And ensure you are subscribed to my always free newsletter for more in-depth analysis that attempts to map out what is likely to happen next to Britain and Europe.

By Nadeem Walayat

http://www.marketoracle.co.uk

Copyright © 2005-2016 Marketoracle.co.uk (Market Oracle Ltd). All rights reserved.

Nadeem Walayat has over 25 years experience of trading derivatives, portfolio management and analysing the financial markets, including one of few who both anticipated and Beat the 1987 Crash. Nadeem's forward looking analysis focuses on UK inflation, economy, interest rates and housing market. He is the author of five ebook's in the The Inflation Mega-Trend and Stocks Stealth Bull Market series that can be downloaded for Free.

Housing Markets Forecast 2014-2018The Stocks Stealth Bull Market 2013 and Beyond EbookThe Stocks Stealth Bull Market Update 2011 EbookThe Interest Rate Mega-Trend EbookThe Inflation Mega-trend Ebook

Nadeem is the Editor of The Market Oracle, a FREE Daily Financial Markets Analysis & Forecasting online publication that presents in-depth analysis from over 1000 experienced analysts on a range of views of the probable direction of the financial markets, thus enabling our readers to arrive at an informed opinion on future market direction. http://www.marketoracle.co.uk

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any trading losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors before engaging in any trading activities.

Nadeem Walayat Archive

© 2005-2016 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


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