Tuesday, April 12, 2011

Lags, Laggards and the Bank of England

Bank of England

Bank of England © fintag

News comments:
So the MPC muppets were right all along.

Inaction sometimes leads to the optimal outcome. The MPC at the Bank of England have been staring into the headlights of inflation and today have gone to the canteen for an extra donut to celebrate inflation falling to 4% (telegraph). This is still way above the average in Europe and the 2% target but hey its going down.

Given the worst squeeze on disposable incomes for nearly 100 years (ftadviser), this supply led inflation is going to go back up as import costs increase due to falling GBP, so the MPC need to put rates up quickly. Of course they won't and inflation will go back up and they will sit cross fingered hoping the British people just give up buying anything for a year.

In all my years on this planet I have never seen such ineptitude. It takes many months for interest rate changes to feed through to inflation but that is not my concern. The UK is turning into Japan but without the savings ratio. Now that is frightening.

The MPC loves these people:
The coalition government
MPs in marginal seats
Those with mortgages
Those who have large credit card balances
Debt lovers

The MPC hates these people:
Those who rent
Those who are old and live off savings
Those who are on low incomes

Time to short GBP big time.

[Will someone fix firefox 4 and Blogger so it stops randomly pasting in http://www.blogger.com/img/blank.gif everywhere. Thanks.]

Today's shorts:
Fish and Chips now a luxury (bloomberg)

UK interest rates to be held til end of year (reuters)

UK to stop growing (telegraph)

Today's longs:
Portugal to leave Euro soon (reuters)

GBP to be thrashed around on the currency markets.