Thursday, February 04, 2010
Readers will be happy to hear that after a lengthy, tedious ordeal, Macro Man managed to secure the requisite stamp in his passport yesterday. How bad was it? The level of bureaucracy was stunning: Macro Man had to pass twelve different interaction points before he was admitted to consult with the officer considering his case. And after that meeting, he was convinced that they had granted him de facto indefinite leave to remain....by virtue of forcing him to remain in the waiting area indefinitely. He could have sworn that he saw Godot walk by at least half a dozen times.
In many ways, it was like being in Vegas: there were no windows and no clocks, and time lost all meaning while Macro Man was there. There are important differences, of course; instead of piping in pure oxygen, the Lunar House ventilation system appears to emit methane. And at £1020 for the pleasure, it was certainly a costlier endeavour than your author's solitary visit to a Sin City casino.
Still, mustn't grumble, as the Brits say; the appalling bureaucratic waste at least has the benefit (viewed from the perspective of Whitehall) of keeping scores of people off the unemployment rolls. Despite this chilling example of "Soviet Britain" in action, however, Macro Man's labour market indicator for BOE policy still suggests an optimal nominal base rate that is negative- even with the recent improvement in the data.
It is partially for this reason that today's BOE meeting carrries some interest. Normally, one might posit that a central bank confronted with a return to real growth (however tenuous) and an inflation rate nearly high enough to merit an apologetic letter would be considering its exit strategy. Not so the for the Bank, however, as tepid M4 growth and the labour market slack could tempt Merv to take out a final piece of "recovery insurance" before he eventually swerves. If the BOE does anything (either expanding QE or cutting the deposit rate), this will be the month, as the quarterly inflation report will be released next week.
A further easing of policy would of course be a gamble for the Bank, given the likely trajectory of reported nominal GDP growth. If Merv does decide to roll the dice and ease policy, 'twould be a gamble worthy of a high rollers' table in Vegas or Mente Carlo. Hmmmm...perhaps Mr. King is angling to lead a renewed push to roll out supercasinos in the UK? Vegas-by-Thames, anyone?