I thank you for your kind letter of the 17th inst. I shall be pleased to attend. I have authorised my letter to you to be published in time for the six o’clock news on a slow news day, for maximum impact.

I understand we may get to meet soon when Mr John Redwood MP, invites his bloggers to tea on the House of Commons Terrace. [hint - Ed]

I remain, sir, your humble servant.

The Prime Minister has asked me to commend your recent fair, balanced and truthful letter and wishes me to convey his approval of said letter being released to the media immediately.

On an unrelated note Gordon Brown is also keen to reappoint some members to the MPC and is considering the possibility of a new highly paid Banking Czar, a high profile post with wide ranging, largely illusory powers.
He invites you to attend an informal meeting with him at No 11 to discuss this proposal.
The PM’s Secretary, Mr Darling, will be happy to make an appointment for you at your convenience.

“The UK is well placed to deal with the credit crunch” ~ most commentators and international organisations seem to see this as a straight falsehood

“Crime is falling” ~ well it maybe falling if you only go out with a six police escort and a stab vest like the Home Secretary, but for the rest of us, the figures simply don’t respect the lawless anarchy that is a UK town centre on a weekend evening. People seem to have lost faith in the politicised police actually being able to deal with offences and so REPORTED crime is falling

“Inflation is 3.3%” Probably the most non-sensical of all when you look at fuel and food prices.

It really is starting to resemble the former soviet union when government stats showed that their economy was a glorious success (as long as you were a member of the inner party!)

Inflation always hits the lower paid first, especially those on fixed incomes such as the retired. We can talk of CPI and 3% or 4% but for those most vulnerable the effective rate is several times that.

This is a matter on which I believe the Conservative Party should take a clear and unequivocal stand. We know Labour will continue to spout the sad old rhetoric of “they are only interested in the toffs, the poor will suffer”. We also know that some will believe them. Although not a member of any party, I do not believe them either as a matter of principle or as a result of actual policies when in government.

I believe the principles of the Conservative party in this respect are two-fold, first that those who succeed should not be punished and secondly that those on lower incomes should have their incomes protected by government policies not plundered.

Furthermore, radical reductions in the lower rates of income tax from 1979-1997 put a lie to the Labour claim.

The first essential policy is a commitment to increasing personal allowances in line with (or above) the real level of inflation for those on average incomes and below (obviously the precise measure is a matter for debate but it is the principle that counts). The next two years threaten to be quite punishing for the less-well-off, an immediate substantial increase in personal allowances in 2010 can restore real incomes to what they are now without stoking an artificial consumer boom.

This must, of course, go hand-in-hand with a regular theme on these pages, namely a substantial reduction of the overall tax burden.

It’s not just a matter of making a promise to get votes, it’s about being fair and doing the right thing by everyone in the country.

Our Industries sold off, Our fishing grounds Plundered, We are now past Peak Oil, our Farming demolished with F&M, Bluetongue bird .
Flu, Two Wars being fought on a Peacetime Budget, A big Pile of Gold swapped for a big pile of…..paper.

All of these are Avoidable expenditures. I am an engineer not an economist, so perhaps I may be mistaken but it looks to me like Great Britain is being Deliberately Gutted.

The Governor has passed your letter to me for reply.

I have been informed by the National Statistical Office that there is a serious error in the inflation calculation issued today. This was caused by the loss of some critical data. The item concerned is coded for security purposes as “seat-4b-10:42-to-Clapham-Junction”. The NSO will publish a correction before PMQs tomorrow.

I am advised that the Treasury no longer considers the “Balance of Payments” to have any economic significance; as they did for terms such as M3 Money Supply. The group that assembled this data has now been re-tasked to carry out an economic study of bananas for the government of the Bahamas; they are due to report their findings in 2018, but this may be delayed.

The recent economic turmoil crossing the Atlantic from America has caused a phase shift in the economic cycle of the UK. The treasury assures me that this is purely a technical aberration that will be corrected by simply changing the dates of the economic cycle to align with government rhetoric.

As a result of the Irish vote on the Lisbon Treaty, the relationship between the Pound Stirling and the Euro no longer has any economic significance. The Prime Minister will make this plain at PMQs shortly before we join the Eurozone of common unit of asset valuation and exchange mechanism.

Apologies, the word Enron was a typo, no such organisation or individual has ever existed. The phrase “off balance sheet accounting” is a media fabrication.

Finally, on behalf of the Governor, I must apologise for the nations current financial situation. If only we at the Bank had listened to Gordon Brown this unfortunate situation would never have arisen.

The governor has been under considerable stress over the last 18 months and he apologises for the fact that he failed to give the government 10 years notice of a possible liquidity problem in certain financial institutions.

The Governor has been my sole concern over this period and I noticed that he was becoming too dependant on me. He found himself between a NORTHERN ROCK and a hard place; dependant on me to make decisions for him, which I did, without a thought for myself as his possible successor. (My membership of the MPC expires in June 2008, I am available for re-appointment).

Yours

I particularly dislike business rates as it just a tax on .. being a business. you don’t even get an extra bin for paying DOUBLE or TRIPLE what a homeowner in the same space might pay.

On a broader note with inflation. I’m a reasonable sized multiple retailer and for quite some time are cost of goods has been increasing. Up until now most of the increases have been absorbed to maintain price points at important levels like 99p. However, as it has now become impossible to do this we are tending to leapfrog figures like £1.09 and go straight to £1.49. A lot of this is a vicious circle where we are trying to pre-empt future wage and general overhead increase, but are in fact contributing towards them. I foresee a lot more inflation to come. I’m not sure if a domestic rate increase will quell imported inflation, but it seems too greater risk not to.

It’s a bit of a myth that people are paying more because of increased manufacturing costs in China alone. The bulk of the price you pay for anything is VAT, business rates, rent and wages. It’s the increases in these that are really pushing up prices.

Dear Governor,
The Chancellor has quite wisely passed your letter on to me, the Prime Minister, for perusal. As this letter will become news for the media I wish for you to alter some inferences.
Since the Chancellor and I are always in complete accord I have decided to respond for him.

1) You simply have to get RPI/CPI back down to target levels. I don’t care how. Change ‘the basket’, invent a new calculation , whatever. Just do it.
We do not care what the real rate of inflation is, just what we say it is matters. In your letter explain that this current situation is temporary only.

2) We no longer refer to “Balance of Payments” at all. We have successfully deflected the media, who in Tory days never stopped going on about it, from even knowing of it’s existence.
Never mention it again.

3) You have failed to blame the USA. We always blame the USA.
George has gone now and is not coming back. It is his fault.
Might I suggest the phrase “The recent economic turmoil crossing the Atlantic from America has….”

4) We also never refer to the exchange rate of £ to Euro.
Always mention £ to $ only.

5) I cannot find any reference to ENRON in any of my treasury notes. Please find out who he is.

6) You appear to have not taken the full blame for inflation.
Look back to your letter regarding Northern Rock [copy attached] where you made clear that it was your own failure to act sooner and to only give the treasury some 6 – 18 months warning that led to the problem.
Please make clear that if you, as Governor, had given the government some warnings about a ‘Housing price boom’ ‘credit liquidity, Inflationary pressures, commodity prices etc at some point within the last ten years then we would have reacted effectively and decisively.
However you failed to warn us and so you must take a very very large measure of blame.

7) End the letter with something like..”If only we at the Bank had listened to Gordon Brown this unfortunate situation would never have arisen.”

Yours,
Gordon Brown.
Prime Minister and appointer of the future Governor of the Bank of England.

Lets hope that normal service is soon resumed.

Scroll down to the very end of this.

That Redwood bloke was in here the other day, asking about something called the “balance of payments”. I pushed him in Rachel’s direction, she understands these things. Turns out that is pretty buggered as well. Watch out for that Redwood; Christ, I hope they don’t make him Chancellor next time.

The good news is the old petro-dollars are rolling in from our friends in the east. Rachel says that is the only thing keeping the currency afloat. She’s pissed at me because she only got 1.20 Euro to the pound for her French holiday yesterday.

Apparently, renaming the nations Capital Account as the Financial Account, hasn’t fooled anybody in the city. But Rachel says we are not infringing the Trades Description Act anymore. That went over my head but she mentioned something called Enron several times.

Got to sign off now, apparently there are some silly buggers on the roof protesting about the price of diesel, sounds like a job for Charlie Bean.

Pressure on wages, particularly in the public sector is likely to grow if rates are cut, Sterling weakens against the Euro and the cost of food goes up even further.

The flight into commodities is down to a severe lack of confidence in the Dollar and uncertainty about which direction the Fed is going to move in the immediate future. Currently the Fed seems to be vacillating and that sends out all the wrong signals. The Americans are stuck between dealing with their savage trade deficit at time of economic downturn or supporting the sinking Dollar and thereby increasing that deficit. Little wonder the smart money is chasing commodities.