W8 policy lecture - Andy Haldane: Bank of England

Thank you Josh for the introduction Claire and for the afternoon everyone, so I thought what I'll do this afternoon is talk about ten monetary myths or ten military myths in finance, actually some of which will sound familiar to everyone. I wanted them to maybe not be familiar. for everyone, some of those myths are from the deep and distant past, those myths have been dispelled again recently and some of them are modern monetary myths that have not yet been completely dispelled and I thought I had talked a little about both as a prelude to a sign of conversation and air between us on some of the big topics here and here is my warm conclusion if you remember nothing else about today's presentation, this is the part to remember, which is I will tell you what I tell all the new ones participants in the Bank of England, and there has never been a time in recent history, possibly in the history of humanity, in which this or those things are being done, now this is the best thing there is when the new ones come in participants, the Whelan

bank

, I say.

If you're not enjoying public

policy

, leave something else, because this is usually the best there is. This is the closest you will get to a blank sheet of paper when it comes to rethinking and rethinking your path. We organize our economies in the same way we organize our financial system and, indeed, the way we organize our societies. This is a real opportunity and the opportunity is not for me. I'm too old and gray Henry as I've been there for 30 years Josh but Apparently in 30 years time the Bank of England will be rethought and reformulated by you, that's your endowment and you couldn't wish for a better endowment than that one, so that's my case.

Now everyone can fall asleep if they want, but that's the key point. Please note as I wander through ten monetary myths, starting with some old ones, by the way, as we go, if you have questions, don't wait until the end, just raise your hand, it doesn't make any sense, don't suffer in silence. just say Andy, what are you talking about, it'll be the first time that's been said, I promise, so here's miss one, here's one and her expression, you may have come across this oppression that's going to do that money is a veil or that

bank

ing is a veil. in one or two people, what just raising your hands to be a concern for me, Joseph Allison now as said and Josh actually already said a few words about it, as said, it's hard to understand, isn't it?

To say that it doesn't matter much whether there is money in our pockets or money in a commercial bank, it doesn't matter, it is a veil to look through to understand what is really happening in the economy, but most have had their supporters along the way. over the years. recently go back maybe half a century or so Milton Friedman I'm sure the name familiar to everyone in this room the essence of monetarism the essence of monetarism or third oxy was that at least in the short term at least in the long term rather money and banking were a kind of veil that could not lastingly affect the good things in life, such as employment, growth, and living standards, but even Friedman and his later acolytes in the neoclassical school would still maintain that it was possible that In the short term, money and banking were a kind of veil that could not lastingly affect the good things in life, such as employment, growth and living standards.

They are not a veil, they were not neutral in their impact on jobs and living standards, in fact they could have quite powerful effects in the short term, particularly when money and banking were unstable, so in a way this expression seems a bit like a paper tiger that Not even Milton Friedman could believe that money in banking was available and yet, just ten years ago, just before the start of the global financial crisis, one looked at academia , I looked at central banks and this myth was very Although they were very much alive and well, it was a struggle to find many universities that could bring themselves to teach a course on money and banking;

They disappeared over the course of a decade or two and if you went from academia to central banks you saw the same patent. The models that central banks like the Bank of England used to make sense of the world did not represent a recognizable banking sector or banking system. We were operating trying to make sense of the economy with models that effectively treated money and banking as if it were a transparent veil with no real impact on the fortunes and fluctuations of the overall economy, jobs and living standards, of course, ten years and ten years wiser.

I hope we all know better now and the reason why, of course, we all know better is because we had a huge banking crisis, one of the biggest we've seen since the 1930s, and guess what turned out, it's not a veil not to be too neutral about jobs, living standards and public debt levels, in fact, it has like a dramatic impact on those good things in life, because any event you can imagine, this graph just scales , so here always, let's take the image on the left side as you look here, this is the kind of trend GDP pre-crisis trajectory that is blue and I have put here the two largest banking crises of the last hundred years associated with the Great Depression of 1929 onwards, which is red and the Great Recession of 2007 2008 2009, which is green and the key conclusion is that in both cases, as everyone knows, Lee's cumulative GDP production loss has been gigantic , almost as large cumulatively as the great depressions, in some countries, including the United Kingdom, has been maturely larger in all European countries, for example, the costs of the Great Recession have been The greater the cumulative costs of the Great Depression of the 1930s, you cannot choose an event in history outside of the war that has had a more damaging impact on our long-term living standards.

Another way to keep track of the cost of this is not the GDP costs, but the fiscal costs to the public sector balance sheet of a banking crisis, the red and green lines here scale the change in the GDP ratio of the public debt that resulted from the Great Depression and the Great Recession, the key conclusion here is the cost of The green line of the public budget of the Great Recession has been maturely greater than the Great Depression of the 1930s and, of course, These are the combined reasons why the global monetary

policy

of central banks was forced to come to the rescue if production and employment are crushed and If the economy faces a fiscal headwind to growth, we need monetary policy bridge the gap to get production back on track and support the functioning of the economy for a period and that has essentially been the story of the last ten years. why interest rates have been at or near the floor in all the central banks of the advanced countries and that is why we have tagged on top of that a liberal dash of this thing called quantitative easing which in old money we call printing money to increase the effects of lower interest rates I will return, we find ourselves with a curious QE.

Josh mentions QE. I will come back to QE later as another of my myths, so if something was not neutral, if something was not a veil, it would be money in the bank was a myth that we should not have forgotten, but somehow we managed it just before the greatest impact on GDP, the current balances that we will probably see in our lifetimes, lesson one, I hope we have learned them now. I would be happy to hear a banking sector in them and the same is true for central bank models around the world about money and banking.

I hope it is being resurrected in universities across the country. It should never have been lost in the first place, so banking is inherently always. What has always been will be a source of instability for the economy for the government. Does that mean the government should intervene and protect, regulate, restrict the banking system well? It was not necessarily the pre-crisis orthodoxy that financial markets could take care of this job. Thank you so much. through their assessment of risk in the system, they could act as a regulator of private sector risk across the financial system, so if a bank or banking system was building its balance sheet too quickly by making too many bad bets, that would increase the risk. perceived risk of that bank that would increase the cost of borrowing for that bank and which in turn would restrict the amount of credit that bank could provide, there would be a countercyclical that would tilt against the risk cycle mechanism operating within financial markets. , so to speak. the financial system would be self-regulating the pricing of risk would do the work on behalf of society if that happened in practice well of course it didn't and it didn't even close it didn't even close so here is a measure of the cost of borrowing the world's largest banks measure of the additional spread over the safe rates of return at which the banks had to borrow and the key point here is that, at the same time that the banks' balance sheets were taking on risk and expanding their balance sheets, they were not there was the faintest sign of that.

Financial markets priced in risk; if anything, the cost of borrowing was falling at the same time as risk was rising. Financial markets did not act to counteract the risk cycle, but instead served to amplify the risk cycle by reducing the cost of borrowing. those institutions that were taking the most risk until the moment they realized the balloon went up and everyone realized they were in crisis at that moment. Look at the scale of the repricing from spreads of about a single basis point to spreads of around 200 basis points. A massive revaluation after the fact just at the time when banks were wanted to borrow;

In other words, in the midst of the crisis, they were the least able to do so because the cost of borrowing had skyrocketed profoundly, profoundly procyclical, amplifying the behavior of the cycle within the financial markets when risk pricing was reached and , therefore, to risk regulation. This is not a regulated risk. It is a risk that feeds. In the banking system, as this image demonstrates, the question arises why it was the financial markets and not just the financial markets. I could add to the list of culprits. Academics like Josh blame him. Central bankers like Andy. That's me.

It could include rating agencies that you could fool. Institutional investors weren't just the financial markets that missed out, it was pretty much everyone under the sun. This was a collective cognitive blind spot. A collective cognitive blind spot and the question is what was the source of this blind spot. What did people collectively get wrong? what were the fallacies that they were operating under and this fall I want to talk about them. I suspect Josh may have mentioned each of which, in fact, he discussed at some length the fallacies that underpinned this radical undervaluation of risk within the banking system.

Here is the first one. one is a bigger bank, a bigger banking system is a better banking system. What we saw in the run-up to the global financial crisis was that banking systems in many countries around the world, including the UK, US, France, Germany virtually everywhere really skyrocketed in scale the scale of assets banking by GDP skyrocketed and we told ourselves a story that this was good news because it involved greater amounts of financial intermediation, greater amounts of financial depth and that in turn knowing projects in the economy in general would increase the The ability of households to borrow to buy that house would increase the ability of businesses to borrow to buy that piece of plant or machinery or land or intellectual property and that would therefore feed the broader economy in some way.

That was positive for growth and here we are, where there is evidence that that mechanism is at play. We had seen many, particularly emerging market and developing economies, whose degree of financial depth had increased and which in turn had served as a springboard for further growth. and productivity in those economies, for them a bigger bank was a better bank because a bigger bank meant greater growth in employment production and living standards, but it turns out that now we know that that was only half of history, in the following sense, perhaps best demonstrated. in this diagram, empirical scatter plot of the relationship along the x-axis, this is the scale of financial intermediation, if bank assets are preferred relative to GDP in a selection of countries and what I am measuring vertically is some measure of productivity, production growth would be sufficient. the work is just as good and the key conclusion is that you actually get this pathascending for certain countries to a certain point, but there comes a point where you can really have too much of a good thing, whether it's a good thing in The point is to bank well, the net effect then is not to increase the GDP standard of living, but to compress it to reduce the growth rates of the good things in life.

The number of reasons why this could be a financial crisis is one of them, but not the only one. It could be that when a financial sector reaches a certain size it begins to attract the best people into financial services and away from sectors where there may be more productivity. How many space scientists before the crisis stopped doing rocket science and studying science? of financial instruments look at what some actually that reallocation of labor may not have been the most efficient use of that labor in the economy in general now it turns out that what is true at the level of the entire system we now know that neither It's true at the level of an individual bank before the crisis we tell ourselves a story central banks regulators academics rating agencies investors full that bigger banks were better banks and we tell ourselves a story for reasonable reasons actually and that's because a bank larger portfolio had a larger portfolio of assets and that larger portfolio led to a greater amount of diversification benefits, as Joshua discusses.

I think before we went in, that was a reasonable point of view, as it turned out that even that part was wrong, but it wasn't entirely unreasonable. I think by distributing its assets that would reduce the risk, the likelihood of that bank going bankrupt. Here's the part, although that's equally important, in fact, even more important when thinking about banking, which is not what is the probability of a bank failing, but what the impact is. has on society when it fails and which we now know is catastrophic, which is a multiple of the impact that a smaller equivalent bank would have if it failed and the reason we know this is if we look at what governments felt compelled to do when it failed. those banks started to fail they didn't let them fail they couldn't afford to let them fail instead they came to the rescue with huge amounts of taxpayer support in one form or another this only gives a measure of the implicit subsidies given to the banks of the UK during the course of the crisis you see the big spikes in 209 and 2010, these are huge amounts of transfers from the public sector balance sheet to the commercial banking balance sheet in recognition of this "too big to fail" problem and Of course, the problem of being too big to fail has its own circular loop, its own loop that amplifies the risk, if you believe you are too big to fail and if the market thinks you are too big to fail, it won't charge you a higher cost of borrowing, but rather a reduction in the cost of borrowing and therefore further amplifying the risk cycle and that is exactly what happened in the period before and after the global financial crisis.

Bigger wasn't better, bigger came with a too-big-to-fail subsidy and a huge guarantee. cost to the economy Another feature of the myth that Josh's mission heard when I arrived, which was ubiquitous before the crisis and which actually remains widespread even now, is not about size but about complexity. One characteristic of these very large banks is that they are extraordinarily complex. complexes operate in many countries operate with many lines of business understanding the risk on the balance sheets of these institutions is an incredibly difficult task incredibly I would say an almost impossible task given the scale and scope of the business of these large banks given that challenge, how do do they do it? do it if you are the risk manager of a large bank, how do you do that complex Gagen Xuan task?

Well, we said to ourselves that this is a place where the application of the science that we are, the technology that we are modeling could really help on the path to understanding how to get under the skin of the risks on the balance sheet was to model them, model them in microscopic detail, assigning a price, what we call a risk weight, to virtually every asset on the balance sheet, millions and millions of asset classes, each of which had its own price its own risk weight generated from of some very complex models developed by banks, did those models do a good job measuring risk? data runs often sometimes data runs that didn't even include a crisis there is a famous mention that the chief risk officer at Gilman Sachs quoted Josh in any of his presentations, he didn't hear the one who now claims he never said this, but Definitely he did, which was right at the height of the national crisis and said we've run our risk models and what they're telling us is that we're currently experiencing risk levels that are 24 standard deviation events multiple days in a row.

If you do the math, that's actually quite unlikely, you know that you would expect a draw to occur on a day of that scale, you know that once every several histories of the universe, the probability of that happening on successive days, I mean, is, is, is Many, many, many, many multiples of them, atoms arose in the universe, so that's one possibility and the other is that the models were total nonsense and what you think, what you think, and that was not by no means an unusual modeling result. They are not at all specific government acts, in some respects even worse to be compounded as a serious crime.

It was not just the banks that used these models, it was the regulators and those risky works are also mentioned. There are risk pricing models that were used by regulators around the world. They moved on to calculating how much capital banks should have as a contingency against a future bad loan or bad impact. So-called risk-weighted capital ratios used banks' own models to calculate how much ready-day capital should be set aside and raised. Surprisingly, those risk-based capital measures did a spectacularly poor job of predicting which banks performed well and which banks did not. This image speaks to that, so that is myth number five that complex finance involves complex models and complex regulation and he is a demonstration. of this this is um each block here is a red and blue bank what is shown in both cases is a measure of the capital in those banks measured in two ways on the left side is one that uses those complex risk weights of the models that I mentioned to do it on the right hand side, this doesn't use a model or if it does, it's a very simple model, it assigns a weight of 1 to each asset.

Ok, the simplest model imaginable for weighing risk. so that will mean that a government security and a complex derivative have the same weight, sounds salaciously crazy, right, what would anyone do that anyway if you compare these same sets of different bank capital measures, cheek for cheek, this using complex models, this using the simplest imaginable is the weighting scheme the reds here are banks that failed the blues are banks that survived the crisis that is why there is no relationship between the measure of risk or capital and the failure is because self account basically this is the simplest weighting scheme imaginable what is called leverage, by the way, it does a much better job. much redder for those banks whose leverage ratios were particularly low.

This discriminates the good and the bad. do it, this is an example, another of the risk models that is not wrong, but gives a completely misleading signal of risk in the system. this is an example of a more general characteristic, a more general property that has been discovered in all kinds of different risk environments that The next is what is the correct answer to address a very complex adaptive system. The intuitive answer is to fight complexity with complexity. A complex system requires complex regulation to keep it under control, but it turns out that most of the time intuition is completely wrong.

It is incorrect that the soundest way to deal with a complex system is to apply simplicity for the same reason that it is not fight fire with fire, you don't fight complexity with complexity, otherwise you get complexity squared, which is much worse, all kinds of examples. In fact, let me give you one. Who has heard of Harry Markowitz? Anyone with Harry Markowitz. HOH Markowitz deals with Bob Merton, the architect of modern portfolio theory. Basically, Merton Markovitz, his framework of thinking tells us that when we choose an asset portfolio we must take into account both the return characteristics of the asset and the risk characteristics the efficient portfolio eliminates risk and return which is why they rightly won an Award Nobel is the basis for almost everything we do in life, as well as in finance and However, when Harry Markowitz retired and it came time to choose about his pension, how do you think he chose his pension assets?

Risk of returning to anyone the principle according to which you want a Nobel Prize. There was no way he expected them all equally. He let this go on one. about a rule where a series of assets ends, he chose the simplest rule possible because it was the strongest for not knowing and in a paper I gave at Jackson Hole, which is the busiest central banking party in the United States a few years ago, now I talked a little bit about This is about the case for simplicity and regulation and I used that as my example, so not just Harry Markowitz and his pension choice, but the example wasn't maybe you've seen it, it was in your background, I really think of a dog catching a frisbee, the idea. is the following, if you think and try to write the capture of a frisbee as a mathematical problem, it is extraordinary.

I can send you the reference on the mathematics of capturing a frisbee because it is a strange object that you know you have taking the temperature of the air. trajectory angle of air pressure and if you solve that the same way Gillman Sachs was solving his risk problems, it would take you a long time even if you're really smart like them, but it's interesting to watch how people catch frisbees in practice because Most of us are not solving that complex Newtonian problem when we catch a Frisbee, we don't do that and the dogs didn't do that either. and-and-and me and everyone, not just you, by the way, I'm sure you're great, but everything is so much better, yeah, that's why the sheepdog is better at catching a Frisbee than me because they taught me a little bit of Newtonian physics. and the sheepdog almost certainly are not and yet it is better how he does it right, if he does, he catches it the same way we all catch a ball in the air, so the ball goes up in the air, you are playing. a lot of english people here cricket americans not okay no one played baseball anyway any ball throws a ball in the air and you are trying to catch it you are running to catch the ball what is the general rule we use to catch the ball well? let me tell you that we use a heuristic, a rule of thumb, and it's called the gaze heuristic and that means we run in a direction that means our angle of gaze toward the ball is constant over time, what that means is we don't run. .

The optimal thing is that we do not run in a straight line if the balls that are on the ground land there. I don't run to that place in a straight line. I run in a curve. We are on the curve, so the angle of view is constant over time. that maximizes my chances this is going somewhere by the way don't worry I'll bring it back the angle of gaze is constant over time that's what we use when we catch a ball and that's how a dog catches it if it runs in a parabola , you can write it mathematically and I've done this, it actually runs on a prop like this, what you're looking at like this at an angle such that you get to the right point in a way that maximizes the chances of capture and and that's basically how everyone we solve the largest complex of problems: we simplify it until it becomes a rule of thumb, a heuristic that works, in this case the simplest possible heuristic, which is that our angle of gaze will be constant in the same way that our risk weight is constant in different types of environments and most of the time this works perfectly, let me demonstrate to you here is a video of a dog while you throw the frisbee and look at the angle at which the dog runs where the dog is where the dog is at In a minute I'll press it again.

You see, it will run in a parabola and you will do a little jump at the exact moment for it to catch the frisbee and everyone will applaud. Ready, here it goes, so here we go, who's going? there is a slowdown now what do I do what is right so good I often see off the right then angle of gaze angle Agassi in a parabola parabola cat now comes around turns around takes it out jumps and misses see see does not always work no No I know how the facial expression brother the dogs facial expression absolutely classic so those rules are almost alwayssolids Katie is not the final fallacy The pre-crisis fallacy was that financial integration is always a good thing for us in every sense when As far as the stability of the financial system is concerned, this was a deep-rooted prevailing pre-Christ myth , since it turned out not to be unreasonable.

It was said that yes, by uniting the world we could spread the risk to the four winds. Yes, a risk that was out of sight. without a mind was dispersed and diversified a more united world was a more stable world risk was distributed risk was diversified and once again, as with many things, there is more than a grain of truth in this proposition that the problem is it's only half true it's only true half the time it's true except in situations where it's not true, it turns out that second set of situations are actually pretty important, so flash integration is in fact , a double-edged sword: it is good and bad cholesterol. it is a source of stability but it is also a source of fragility it is the same thing let me show you this this is a little this is more complex than it seems it is a little it is by the way this only makes clear the The scale of the rebound in financial integration in the last 250 years has been amazing, so the blue here, so what do we have?

Pink is pink is financial and blue is commerce and the scale of that is pink. on the right side and this makes it clear that the integration of global flows of goods and services has seen a huge rebound over the last century and a half, but a rebound in the scale of financial integration is really off the map. has been huge, a much more financially united will of the genuine global financial network is that it's either a good thing for stability or a bad thing for stability, well, it turns out it's both. This makes it clear why slightly complex 3D graphics are difficult to understand.

I realize that let me try and you will never get over it, so by measuring vertically I have a measure of risk in the system, think about it, the number of banks that fail, where yellow is NaN and red is basically everyone is fine, so the size of the hill. scales the size of the risk to the system by measuring here we have a measure of the strength of the banks how much equity capital they have on a balance sheet how large their capital ratio is, so moving this way means stronger and safer banks and ultimately the third dimension The measured depth is a measure of the degree of union of this network.

How united is the financial network: Higher numbers mean greater degrees of togetherness, ness, so imagine that you are now experiencing a situation where the world is becoming more united, well, most of the time, it's pretty good that you are sitting in this yellow zone, the zone of tranquility. and that is the zone where risk dispersion, risk diversification, risk dispersion, total profits is happening and that is a good thing for the stability of the system. Much of the story is true, but the problem arises when something big and nasty like a global financial crisis comes along, the kind of thing that eats up the amount of capital that banks have, what you find is that suddenly you can go from yellow zone of Tranquility to the red zone of fragility.

Because? Because? Because? Why suddenly? shared risk suddenly becomes extended risk a shared problem is not a halved problem it is a duplicated problem your problem spreads across the global network and spreads further and spreads faster precisely because that network is more closely interconnected This is a characteristic of every network you can conceive of, whether social, natural or physical, it is called the robust but fragile property of connected networks, the more connected a network is, the greater degree of stability nests on the knife's edge, a larger area of ​​tranquility but at the same time a larger area. of fragility, just as a good contagion becomes a bad contagion as a shared risk becomes a duplicate risk and it was that second part of the equation that risk models, regulators and academics failed to fully appreciate and That's why we find ourselves at the top of the hill.

In 2009, more myths emerged in response to this: what did regulators do right? Understandably, as expected, they tried to redact some of those errors, including requiring banks to hold the largest amounts of capital, what is called bank capital, and of course many banks were not very happy about this. Here is the The progress we have made by the way he looks at the capital ratios, the capital ratios of some of the largest banks and the liquid asset ratios of those banks that made quite a bit, the regulators have done a lot and I was once one of them.

So that banks have more in the tank for difficult times, banks' capital ratios in some cases have more than doubled and that is good news. This has not been a painless exercise. Banks in general have not thanked regulators. Because of their problems they have repeatedly complained that capital is being set at two high levels now. What is undoubtedly true is that capital is being set at higher levels than before the crisis, but does that mean too high? Well, there's no single, simple answer to that, but here's a historical metric for whether these levels are really high.

This looks at the capital ratios and liquidity ratios of UK and US banks over a much longer period of time. Let's take the image on the left side, which takes us back more than a hundred years, to the end of the 19th century. In the 20th century we will see a more recent rebound in capital, but this still leaves it at less than half the levels it had in the early 20th century, so by any historical metric, capital is higher than in the past and that's a good thing. but it is by no means high, at least by historical standards, now one of the reasons why banks are so reluctant to higher capital ratios is because they say that it can harm their ability to lend, that greater amounts of debt capital raises the cost of capital for them and that restricts their ability to lend that is the argument, is there any support for that in the data?

Well, we have a natural experiment after the global financial crisis, which was: banks that were subject to higher capital ratios lent less afterwards and the short answer that is no, the short answer is exactly the opposite, actually, as As might be expected, those banks with higher levels of capital were in a better position to lend in the immediate post-crisis period, more fuel in the tank, larger reserves for emergencies and that gave them more confidence to lend to businesses and households after a major crisis became far from being a source of credit restriction. Greater capital. Greater reserves for emergencies.

Another thing that can help preserve credit and loans in stressed situations, the kind of situations that, of course, bank capital that was designed for how many times here Josh, yeah, I'll shut up on the last two myths and the last one is more of an open question, but this is what I should really cover because I know Josh mentioned covering the QE bill very strongly. I had opinions on QE, there have been many, let's be clear, so in this country, the Bank of England, my institution bought almost half a trillion pounds of assets, in fact I'm on the board, it looks after that, it should try to be on the board. directors of a company with assets of half a trillion pounds is terrifying, but globally, the 12 13 trillion pounds of assets were bought by the US eurozone central bank, the Bank of Japan and in Elsewhere, a lot of money in the system, of course, the purpose of that QE was to support the economy, but the mechanism by which this is some of the economy was, at least in part, increasing asset prices and that has caused a lot of people to be quite upset about the adverse consequences that it could have had in particular. for inequality by increasing asset prices, hasn't this made the rich even richer at the expense of those who were asset poor?

In fact, our QE and lower interest rates like those of the central bank sometimes find us getting hit in both directions, so that older generations who rely on their savings, for example in banks, said they are killing us with lower interest rates we don't get money from our bank deposits and then the younger ones said they are killing us with their QE which is making older people much richer while we haven't even been able to buy a house yet, for which the cost will be even higher in the future due to their actions, which is why both old and young, rich and poor, were up in arms about QE.

Was that justified? No, now he expects me to say no. you, but it's actually backed up. I've looked at it, you know, this is such a sharp point, such a sensitive point, we and others have looked at this in microscopic detail, household balance sheet by household balance sheet, and we wonder how QE has affected you. Is it if it's your income? How does it affect your wealth? How does it affect your happiness? I have even measured happiness household by household and asked if QE makes people happy and the good news is that it does, that's it, show your Happiness a lot now we will show them income and wealth, this is broken down by age group.

I could cut it either way so you understand some of the complaints, so if it's poorer, if it's an older household. your income is lower as a result of lower interest rates if you are a borrower and you are young, yes you have money, if you are older and a saver you are out of money, the pattern of wealth is somehow the change if you are older and you have assets, you have done better than if you are younger without them, but the key conclusion if you take both together or if you just measure some take a measure of well-being is that almost all, with the exception of maybe less than 10%.

Maybe 5% of people have improved their financial and non-financial situation as a result of QE and the main reason why they do not perceive this, of course, is because people do not perceive the main reason why QE has worked. that has been putting people in the right jobs and they look at the direct effect of QE or lower interest rates, greater wealth or lower income, what they don't directly look at is the effect that QE has had on generating additional jobs without QE without me buying half a billion. pounds of assets, not just me but me and my institution, there would have been between half a million and three quarters of a million more people in this country without a proper job, that's what we're talking about, guess what, it's bad news, it's bad news for They are not now sitting around saying I got a job because the nice Bank of England generally think it was due to their good luck or skills and in some cases it was, but without our dose of mantri medicine, those people would also have been materially worse off. , that's what this calculation does, so whatever you read and hear in the press almost daily about how pernicious CR has been in worsening inequality, believe a word, read my article on the subject, instead From that, it has not only made you Richer but happier to tell your parents tonight that you were all happier as a result of Andy's actions at the Bank of England.

Now it should stop. This was my last slide. What is the hand that works? The work to be done. I've given some examples of things we could discuss, but actually, instead of me going through this, I get some questions from you about what you'd like to talk about about any of these things or anything else.