According to the latest RBNZ news release there is a new inflation busting piece of technology called KITT, no not the Kitt above (Sorry Micheal) I’m talking about Kiwi Inflation Targeting Technology (KITT).
Quote: “The new Reserve Bank economic model. KITT replaces the decade-old Forecasting and Policy System (FPS) model, and will be an important tool for Reserve Bank forecasting and economic assessment into the future.” Wow sounds impressive…
But wait there’s more… According to the news release there are more tools at the RBNZ’s disposal other than KITT, yes they can extrapolate the statistical patterns in available economic data, but wait there’s more and I quote: “Another way the Bank obtains information for its economic assessments is through economic indicators. There are thousands of these indicators, covering New Zealand and elsewhere, which demand expert and careful analysis to distil the meaning.” Wow that sounds like alchemy , I sure hope they distil the right meaning and don’t blow themselves up!
I don’t know about you, but while they are trying to make Gold out of Lead, I think I would rather just buy the real thing.
And more: The fourth article, "looks in detail at how public views on inflation are formed, discussing demographic evidence about how households consistently over-estimate inflation. The Reserve Bank's inflation analysis depends heavily on understanding how the public expects the economy to develop”
Yes it’s all about expectation and opinions, that’s where I went wrong, it has nothing to do with logic.
However that last statement says a lot about the nature of central banking, many people wrongly think it takes an expert in mathematics, a logic expert to guide a countries finances, after all money is just numbers on paper or computers, but actually it turns out it’s all about mixing expectations with some financial wizardry.
I can’t help but comment on the statement “households consistently over-estimate inflation” what a joke, the reserve banks job is to create inflation without anyone noticing it, I call it the grand illusion. Do readers here believe the CPLie reports the real rate of inflation? Give me a break… (CPLie is my name for the CPI)
To be fair, the RBNZ and other central bankers around the world are fighting a big battle here, the battle against logic, so they need all the help they can get! It’s not easy to have debts mean nothing and money to mean something at the same time, some might ask “why do I work for money if debts in same said money don’t matter?”
"We expect the economy to begin growing again toward the end of the year, but the recovery is likely to be slow and drawn out. It could also be erratic. To many households it may not feel like a recovery at all, with lower employment, house prices and wage increases into next year."
So they are expecting a recovery but no one will know it, you just have to believe it OK, do you have faith in the RBNZ or not?
Stay tuned…
Will KITT be able to inflate away debts and at the same time provide low inflation? Will KITT be able to maintain the credibility illusion and escape the inflation monster? Will KITT be able to make debts worth less and at the same time maintain the value of the currency they are in??! In other words…Will KITT be able to defy logic??!
