Watching the press releases from the Bank of England one can't help but wonder why they bother. They really don't understand the situation. On the 2nd of August they announced (as reported by the BBC)
Its rate-setting Monetary Policy Committee (MPC) has voted to maintain rates at the historic low of 0.5%.
It also decided not to increase its programme of quantitative easing (QE), having lifted it by £50bn last month.
Now (8 August) it appears that this action was based on an overly optimistic view of the economy:
The Bank Of England is expected to cut growth forecasts close to zero from the 0.8% predicted in May as the double-dip recession intensifies.
The quarterly inflation report is likely to indicate no growth for 2012 compared with 2% predicted a year ago.
Why do they get things so wrong? Steve Keen has said that their models don't include banks, money or debt, so they can't predict a crisis caused by banks and money and debt. But it also means that they don't understand why the crisis continues, and why, as Richard Koo says the kinds of measures that have worked before are not working now. It's quite sobering to realise that the head of the Bank of England and the Chancellor of the Exchequer, and their staffs and advisers, don't understand the economy.