Topic: trust, policy, facts and lies
Conclusion: big lies are as easy to reveal, as they are to believe
Conclusion 2: Do the math, make the effort, a simple checksum will often do – many lies are easy to catch if you at least try. Trust nobody!
Central banks use sophisticated time-tested methods to set a policy rate that reliably leads to a predictable range of inflation
In theory, central banks control things like economic growth and consumer price inflation, by setting their policy rates (a set of interest rates that banks pay or receive when borrowing or making deposits at the central bank. In practice, their theories, models, and actions are at best worthless but most likely incredibly harmful.
Central banks often publish their forecasts for various macroeconomic variables, including their own policy rate (that they themselves can control to a fundred percent certainty). Amazingly, even though central banks are supposed to understand how the economy works, and how their policy rate is supposed to decide among other things the future rate of inflation – and thus also what the appropriate future policy rate would be – the CB prediction errors for their own policy rate are higher than for any other phenomenon tou can think of.
Not only are the errors wrong in direction (which would be completely out of the question if their models had any relevance for the real world), when they get the direction right they are often an order of magnitude (10 times) wrong in amplitude.
The following picture shows the situation for the Swedish central bank “Riksbanken”
The central bank policy rate hedgehog
(aka the map of lies, more lies, the worst modelling in history, blind academics, power hunger, hubris and stupidity)
On September 6, 2018, the Swedish central bank, known for being the oldest and most retarded central bank in history, publishes its latest stupidity (interest rate decision). Just 15 years ago, careful modelling and the most thoughtful decision process Riksbanken’s members could muster resulted in a policy rate of 500 per cent. Yes, that’s 50 000 basis points. In a few weeks on September 6, they are expected to stick to their current world record breaking moronic idea of a negative interest rate being prudent, effective, and simply the absolute best the central bank committee members can conceive.
Take a look at the chart below. Yes, they really are that oblivious.
Over the last ten years, Riksbanken has managed to do among other things the following:
- Predict that they will increase their policy rate to 4.5-5 per cent, but in reality they lowered it to 0.5 per cent, i.e. 1/10 of their prediction level, not to mention the error in direction
- When the rate was 0.25 per cent, they thought they would soon raise it to 4 per cent, but only briefly reached a peak of 2 per cent before backing down to around zero again (while most of the time holding on to delusions of going to around 3 per cent)
- In over 25 consecutive predictions, consistently predict increasing the rate (that they control, Nota Bene) by 1.5-2 percentage points over the following few years, but in every single instant actually reducing the policy rate, most often ending up some 2.5 percentage points below their own prediction.
Most of these decisions are so wrong, ignorant and stupid that they defy mathematical description. How wrong actually is going from +1.0 per cent to -.5 per cent while predicting going to +3 per cent?
How can they, or anybody else for that matter, have any confidence whatsoever in what they are doing, when they predict increasing the policy rate by 5x from 0.5 per cent to 2.5 per cent, but actually lowering it to a NEGATIVE 0.5 per cent?
Imagine performing in a similar way at your job, or having employees with that kind of track record. It’s even worse than the performance of professional Tesla profit forecasters (picture below)
It is by now of course patently obvious that the Riksbank members have no clue what they are doing, that their models have no relevance at all for the real economy, that they are perfectly incapable of adapting (25 consecutive predictions that were completely off the mark, remember?), and that they have no concept of the complexities of real life and the dangers of unintended consequences of their retarded experiments — ever heard of phase shifts* for example?
* there is a real possibility that very weird and adverse (unknown) effects** can result from negative interest rates. Just take a moment to ponder Credit Suisse that raised their mortgage rates when the SNB’s policy rate was lowered below zero, to compensate for the cost of keeping funds at the central bank
** but who cares? Let’s ban cash to prevent people from avoiding bank accounts with negative interest rates
Conclusion: trust nobody, do the math
Question: Do you think the authorities have this covered? Do you think they know better than you, or even than most? Think again, their models and myopic thinking combined with greed and hunger for power have made them the least fit of all to do what they are doing. And yet, the more damage they do, the more power they are awarded.
Oh yeah, this will end well.
If you own physical gold that is.