Dirk Van Dijl is the co-founder and inspiration behind the success of Enterprise Britain. By training he is an economist and relishes any opportunity to discuss his pet theories. Recently, we had lunch together, and after sixty minutes of his views on monetarism, I had lost the will to live.
Much, therefore…hey, it’s holiday time. A summer quiz question for you:
“Who said ‘Lies, damned lies and statistics’”
- Mark Twain
- Jeremy Paxman
- Benjamin Disraeli
- The Governor of the Bank of England
As I was saying, much, therefore, to my own surprise I last week attended an inflation briefing at the Bank of England.
About sixty people attended and witnessed what was a professional and interesting presentation.
Inflation is an emotive and complex issue. The CPI measures it by consumer prices, the CPIY measures it by consumer prices excluding indirect taxes and the RPI is the Retail Price Index.
The Monetary Policy Committee, apart from giving interviews to the financial media, set interest rates which are designed to control inflation. If inflation exceeds the agreed annual inflation rate of the Consumer Price Index (currently 2%) for any period of time the Government must write a letter to the Chancellor of the Exchequer explaining the circumstances.
CPI inflation in June was 3.2%. “Dear Chancellor, how are you…..?”
Now, here is the interesting bit. The main reason for this situation is that the oil price was 30% higher than expected. This is described as a ‘temporary effect’.
The MPC are agonising as to whether to raise the base rate by (say).25% in the next few months. Britain’s kindly, humanitarian bankers and building society bosses, with one eye on their Christmas bonuses, are itching to up their borrowing rates.
“Give us a quarter rise Merve and we’ll love you forever” they muse.
The social and economic consequences for those already suffering the most (this excludes the Coalition Cabinet most of whom are well-off/rich) could be awful.
BUT, and here’s the rub, a recent authoritative report suggested that world demand for oil is weakening and the price could fall significantly.
“Dear Chancellor….whoops….yes, I know, CPI fell to 1.75% this month.”
PS. Yes, Chancellor, we are trying to find you an explanation for the record levels of mortgage arrears and housing repossessions.”
Quiz question: The answer is Benjamin Disraeli.
Those of you who thought ‘Mark Twain’ were misled. He used the phrase but always ascribed it to Benny.
If the oil price falls the Governor of the Bank of England might coin his own phrase:
“Lies, damned lies and the CPI.”