The Bank of England: There’s Only One Solution!

[GoldCore]

Central Bankers have lost all sense of reality…

It is no secret that central banks have turned their full attention to the high inflation numbers.

And there is little doubt in most consumers’ minds that prices of everyday goods and services are rising faster than official measures indicate.

The Bank of England is no exception – its monetary policy committee voted 5-4 to raise the bank rate by 0.25% at its February 3 meeting, with the four dissenting members wanting a larger increase of 0.50%.

Also, the official consumer price inflation numbers in the UK show prices rose over 5% from a year ago, and the expectation is the percent increase is going higher in the coming months.

Pressure on The Bank of England is High!

The Bank of England’s statement reads: 

Twelve-month CPI inflation rose from 5.1% in November to 5.4% in December, almost 1 percentage point higher than expected at the time of the November Report.

Inflation is expected to increase further in coming months, to close to 6% in February and March, before peaking at around 7¼% in April.

This projected peak is around 2 percentage points higher than expected in the November Report.

Also, the projected overshoot of inflation relative to the 2% target mainly reflects global energy and tradable goods prices.

The further rise in energy futures prices meant that Ofgem’s utility price caps were expected to be substantially higher at the reset in April 2022.

Core goods CPI inflation is also expected to rise further, due to the impact of global bottlenecks on tradable goods prices.

UK Consumer Price Inflation Chart

Here is the catch – the official statement says rising prices are the result of rising energy prices and global bottlenecks. However, then the Bank of England governor, the very next day, says wage increases must slow down to help the Bank of England ‘keep a grip on inflation. 

Moreover, going back to the BoE’s official statement on February 3:

Underlying earnings growth is estimated to have remained above pre-pandemic rates and is expected to strengthen over the coming year, to around 4¾%.

This is consistent with the results of the Bank’s Agents’ annual pay survey, with the tight labour market, and with some temporary upward pressure on wage settlements from higher price inflation.

 

The BoE expects wages to grow at 4.75% meanwhile consumer price inflation is expected to grow at 7.25%.

So wages are not even expected to keep up with consumer price inflation! However, this does not even consider the increase in house prices that are growing at close to 10% per year.

Also, the bank governor does not care that wage earners are by definition losing purchasing power.

UK Average House Price Chart

Wage Restraint to Keep the Grip on Inflation

Moreover, here is the real kicker – BoE Governor Bailey’s salary package (including pension benefits) totaled over £575,000 in 2021.

Yet latest figures from the Office for National Statistics for 2020 show UK’s median disposable income (after income taxes) in the UK was just £29,900.

And that this disposable income increased by only 7% during the decade from 2011 to 2020. It is an annual rate of only 0.8% per year.

And even worse this report showed that income for the poorest fifth of the population actually fell by an average of 3.8% per year between 2017 and 2020. This is when inflation is taken into account.

So not only are wages somewhat stagnating for all income levels – but declined for the poorest.

The chart below is from the Office for National Statistics – Household Finances Survey.

National Statistics – Household Finances Survey Chart

Moreover, now that central banks have backed themselves into a corner by keeping the printing presses and financed government largess spending. This is without consulting the citizens; they want the citizens to take the brunt of inflation by not asking for wage increases? 

Central banks have helped finance government largess by buying their debt which inflated asset prices including houses, and equity markets through keeping interest rates incredibly low. It was not just since covid but since the financial crisis of 2008-09.

And now that it is time to tighten policy because of inflation partly due to the pandemic they call for restraint from those that can least afford it … the loss of reality is astounding.

[Minimalist]

16 minutes ago, GoldCore said:

the loss of reality is astounding.

[CANV]

if you happen to be a working/middle class Tory, you could have voted for a Corbo/Green alliance government in 2019 and you would have bene better off.   they would never have dared to pull off the stunts Carrie and her wife bunter have...  

[FlorinCollector]

https://www.bankofengland.co.uk/news/2022/june/resolvability-assessment-of-major-uk-banks-2022 interesting read

[modofantasma]

6 hours ago, FlorinCollector said:

https://www.bankofengland.co.uk/news/2022/june/resolvability-assessment-of-major-uk-banks-2022 interesting read

"Bail-in’ is our preferred resolution strategy for the largest banks that provide vital services to the UK economy. In a ‘bail-in’ the firm’s equity is written off, and debts written down, to absorb losses. Then it is recapitalised – the debtholders whose debt was written down are issued equity and become the new shareholders. In the medium-term, it would be restructured to address the causes of failure and restore market confidence. The firm remains open and operating throughout the resolution."

So... Who are these debtholders they speak of? 🧐

[FlorinCollector]

7 hours ago, modofantasma said:

"Bail-in’ is our preferred resolution strategy for the largest banks that provide vital services to the UK economy. In a ‘bail-in’ the firm’s equity is written off, and debts written down, to absorb losses. Then it is recapitalised – the debtholders whose debt was written down are issued equity and become the new shareholders. In the medium-term, it would be restructured to address the causes of failure and restore market confidence. The firm remains open and operating throughout the resolution."

So... Who are these debtholders they speak of? 🧐

It says it will be the shareholders who will be holding the bag first not the tax payer. 
 

So when it says the debt holder will be the new share holder I guess it means those who were the existing share holders.

But why would you want to be a shareholder in a company that is winding down to end. 

[Paul]

11 hours ago, modofantasma said:

So... Who are these debtholders they speak of? 🧐

Dont be surprised if it is a bail-in with account holders "Cyprus style" not just shareholders,

You are a partial shareholder of the bank if you have savings/deposits with them

Cyprus style, they'll just say anything you hold in bank over £X amount you are issued shares 

The money you deposit into the bank you think is yours really isn't, you are an unsecured creditor of said bank 

In this day and age, the only thing i would hold in the bank is enough to cover your day to day monthly expenses, hold your rainy day money outside of the bank or hold some money across several bank accounts, not having all your eggs in one basket with one bank   

When and if there is ever a bank run or similar it will already be agreed withdrawal limits, i also don't see it as any coincidence why branch after branch is closing its doors, we know they are pushing the cashless agenda, but you cant run on a bank, if there is no bank to run to ! 

Restricting outwards transfers from online service could be stopped at the flick of a switch im sure