(with apologies to Tim Congdon and all highlights, colours and italics etc are mine)
Opkin' : It Congdon man! He surfaced inna Sunday Times wi a beltin piece!
Pickardthepainter : Quick! Fire the maroon man.(he all at sea) We gotta have a all crew meetin inna breakfast nook. Congdon he a top dude! Like wot dished the dirt on the Deutchmark Shadow an how we was gonna hit the nebula in '89/90. Turned out bad man - fallin house prices, dudes onna dole, recession nebula until 92 - felt like sh*t until 96.
A pause while the beamin up machine does it's stuff... then...
Congdon : Y' canna change the laws o Friedman!
Pickardthepainter : Yo Congy dude! Welcome aboard...
Previously...on Dorktrek : Lost In Space...
The crew from the loft in downtown Palookaville have fallen thru the back of a cornflakes box, in the breakfast nook of the loft, in downtown Palookaville and onto the bridge of the United Flakes Starship Turnerprize, which has been hailed with a strange warning about trillions of dollars being sucked into a deleveraging black hole. On the way to investigate the Turnerprize was caught up in the dreaded 'Flation - a nebula of the most disturbin kind.....read on at yo peril...
For the full article see
Bank failed to heed the alarm bells on inflation -
Congdon : "In evidence to the House of Commons in February last year I warned that by the spring of 2008 the Bank of England would be “in quite serious trouble” by the standards of the Nice (non-inflationary, consistently expansionary) years from the early 1990s. I said an inflation rate of 4%-5% in 2008 or 2009 would not be “a surprising sequel” to policy mistakes “since mid-2004”. I suggested that interest rates might have to be raised to 6%-6.5% “to bring inflation back to target in 2009”. I did not give a precise forecast for the year from mid-2008, but proposed an inflation rate of 4%, an output growth rate of 1%, falling house prices and 6.5%-7% base rates.".......Zooney : Wow wotta player!...sucker got it right onna button!
Congdon : ..... "Why was I so worried in early 2007? And what had the Bank of England got wrong “since mid-2004”? The answer is that from mid-2004 to early 2007 the Bank of England had allowed too rapid growth of the quantity of money. In the balanced and stable Nice years — that is, the decade to 2004 — the growth rate of the M4 money measure averaged slightly more than 7.5% a year. But in the three years from mid-2004 this figure jumped to over 12%. (M4 includes notes and coin, and virtually all bank and building-society deposits.)"......
Zooney : Milt. says ..."The source of inflation is fundamentally derived from the growth rate of the money supply.
Congdon : ......"Most money consists nowadays of bank deposits, but a deduction is necessary for artificial deposit creation between financial institutions and within banking groups. In 2006 and 2007 such artificial deposit creation was on a huge and bewildering scale, and undoubtedly puffed up money growth."....
Zooney : Yo dig that red stuff man!
Congdon : ...."But by mid-2006 the Bank of England ought to have realised that something was wrong. As the Bank itself publishes enough information for an analyst to identify the scale of artificial deposit creation, it ought to have known that underlying money growth had accelerated to a double-digit rate and posed an inflationary threat. Companies were flush with cash, takeover activity was boosting share pricesrapid house-price inflation was stimulating consumer spending, and so on."....
Pickardthepainter : Remember it well dude. us all here onna bridge lookin atta screen, seein everthin goin blue .
Congdon : "In the last Inflation Report, the Bank had the gumption to publish a chart with a money-growth series adjusted for artificial deposit creation. With such deposits deducted, M4 growth in 2005, 2006 and early 2007 was a little lower than on the original series, but was still above 10%. Given the long-term relationship between money and inflation, the conclusion cannot be escaped: the Bank of England made a policy error in this period by failing to curb money-supply growth."
Opkin : Yo! It were the bank wot dunnit!
Congdon : "Where do we go from here? As far as the economy is concerned, the situation has changed radically since the start of the Northern Rock crisis a year ago. Banks are still expanding their balance sheets, by absorbing the business carried out during the boom by their prodigal offspring — conduits, special investment vehicles and such like. But they have cut back sharply on new credit to important outside customers, such as companies and homebuyers."
Pickardthepainter : "Bubble, bubble, toil an trouble, our shares halve an they shares double!"
Congdon : "The chart of adjusted M4 growth in the May Inflation Report shows that the bank deposits of the latter are now growing much more slowly than in 2005 and 2006. Indeed, money held by companies has been falling in the past few months, while cost pressures — from higher energy and input prices — are severe. The result is a corporate liquidity squeeze reminiscent of that in the busts of 1974, 1980 and 1991...."
Spider : Say wot!!!? We busted man! Suckers 'av bust the boom wot Brown said was 'istry. He said it was the Toryons wot dunnit last time and he was gonna play it a new way!
Congdon : "Brown must now cope with the political fallout. Some commentators have hinted that he may try to overcome the monetary straitjacket by “fiscal reflation”, with tax cuts and yet more increases in public spending. That would be the height of folly."
Pickardthepainter : O.K. Three cheers for Congy and maybe this new piece a the jigsaw gonna get us outa here! But don count onnit... Far as we here in space can see...instead o lettin down the balloon and takin it onna chin, they suckers is gonna try an fix it....SHEEEEEEIT! look out below...
To be continued...
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