The topsy turvy world of Mervyn King

From Mervyn King's opening remarks on this month's inflation report:

The story that inflation would be high in the near term but eventually fall back has been a feature of the past six Inflation Reports. We can take some reassurance from the fact that inflation is now falling. But we are still steering a course through choppy waters, and many people are experiencing difficult times.

Many savers continue to receive negligible returns on their savings. Over a million more people are out of work than was the case four years ago. And those who are working have seen the purchasing power of their pay sharply reduced. These are the consequences of the painful adjustment prompted by the financial crisis, and the need to rebalance our economy. Unfortunately there is no easy remedy.

We all want to return to a world with a more normal level of interest rates. But if we were to raise interest rates to such a level now, that would serve only to turn a gradual recovery into a recession, put more people out of work, and cut the value of assets on which many savers depend.

??? It's a bit worrying when the bloke who is supposed to be in charge of the monetary system can't tell the difference between "savers" and "borrowers", they are in fact opposites and their interests are diametrically opposed.

1. I see no evidence to suggest that increasing the Bank of England base rate a bit to its traditional level of inflation +1% would do much harm; that would mean interest rates going up to (say) 2.5% and inflation coming down to (say) 1.5%.

2. UK companies have deleveraged over the past few years and are not big interest payers; and for every £1 extra interest paid by borrowers (i.e. leveraged land price speculators), the disposable income of savers will go up by £1, net impact on the real economy precisely nil.

3. There are other things - like taxes, red tape, the National Minumum Wage, the welfare trap, and possibly even immigration - which have a far bigger impact on employment levels than nudging up the base rate ever so slightly.

4. Finally, what's all this chit-chat about "rebalancing the economy"? What he proposes is just more of the same old crap; he clearly sees propping up banks and leveraged land price speculators as his top priority, and to Hell with everybody else.