Central Bank´s forward guidance has a ring of the blind leading the blind.

Sir, John Authers concludes his “BoE guidance signifies more work for investors”, August 10, writing: “The effect of the extra guidance from Mr Carney and other central bankers is to force investors to watch the economy more closely and make their own decisions”.

Indeed, though investors should always watch the economy and always make their own decisions, it now becomes even more complicated with forward guidance, because that is something akin to the blind leading the blind, and because therefore the investor now also needs to concern himself with what the central bank blind sees.

Like banks were forced to heed the opinions of some few credit rating agencies, which led many of them down the wrong path, are investors now supposed to heed the opinions of some few central bankers? Would we all not be better off, if central bankers would just shut their mouths up, and allow for a diversity of investors to guess what they might be up to? That at least sounds as leveraging systemic risks less.

And, if then a central bank guides you down the wrong path, what on earth is a poor investor to do?

Is Mark Carney allowed not to tell the truth in order to make consumers and companies feel more relaxed?

Sir in “Mark Carney’s risky revolution” July 31 with respect to “forward guidance” you write that “Mr Carney believes guidance can provide extra monetary stimulus at a time when interest rates are already ultra-low. Consumers and companies will feel more relaxed about borrowing if the central bank reassures them it does not intend to hike rates soon.”

That begs the question whether Mark Carney or any other Bank of England governor must tell the truth and only the truth, or is he really allowed bending the truth, in order to have consumers and companies feeling more relaxed?

Is that why they hired a Canadian?

Central bankers, more than setting targets and aiming, should make sure their objectives can be reached.

Sir Samuel Brittan wishes for the Bank of England to state their objective rate for nominal gross domestic product under which they will keep interest rates low, “The real target that Carney should be aiming for” July12.

That is all fine, if low interest rates were all it took to achieve that objective, but is it not! 

As is, with banks instructed by regulators to extract profits from the past, by lending to “The Infallible” against very little capital; and not lending to the future, “The Risky”, by means of requiring banks to then hold much more capital, the real economy will not be able to achieve non-inflationary growth, unless, miraculously, bureaucrats get all other incentives absolutely right.

Getting rid of these immoral and stupid risk-adverse regulations that is what Carney and his colleagues should be doing, but, admitting they were so wrong, might be requiring too much humility of these besserwisser bureaucrats.