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There was a time when central bankers could show up at the annual shindig in the Rockies organised by the Federal Reserve Bank of Kansas and think they had it cracked. Back before 2007, the mood at the annual Jackson Hole symposium was assured, even smug.
No longer. These days, central bankers are full of doubt. They wonder why the response to the colossal stimulus provided in response to the Great Recession has been tepid. They wonder why the old relationships between growth, unemployment and wages have broken down. And they wonder what will happen when they finally abandon the zero-interest-rate regime now in force for more than half a decade.
As Stephen Lewis, economist at broker ADM, puts it: "Only when central banks embark on their normalisation process will the truth be revealed. For all we know, they may have been applying cosmetics to the mummified remains of their economies."
For some time, the markets have seen the Bank of England as the major central bank likely to start the normalisation process first. Last week's news that two members of Threadneedle Street's monetary policy committee – Martin Weale and Ian McCafferty – voted for a quarter-point interest rate rise did nothing to dampen speculation that the Bank was getting close to dipping its toe in the water.
Mark Carney, the governor, seemed to be steering markets in that direction when he said that rates might rise even before wage growth outstripped inflation. Surely that was a signal that higher borrowing costs might be in place before the end of the year?
Well, not quite. Carney's comments need to be seen in the context of Bank forecasts which show that wages will not start to rise more quickly than prices until the second quarter of 2015. Since most City firms currently expect a rate rise either in the final three months of 2014 or the first three months of 2015, Carney's remarks should hardly have come as a surprise.
Recent history also shows that there is no guarantee that Weale and McCafferty will win over the three MPC votes they need to secure a change of policy. There have been times when a minority on the MPC has called for higher rates or more stimulus, only to backtrack later.
All the signs are that the two current dissidents will have quite a tough job getting a majority. For a start, Weale and McCafferty have been proved wrong in their assumption that the pick-up in inflation seen in June would be permanent. News that came in after the MPC meeting showed that the annual increase in the cost of living fell from 1.9% in June to 1.6% in July.
What's more, inflation could fall further over the coming months. David Owen, chief European economist at Jefferies International, has noted that if the monthly changes in prices are the same as they were on average in the 10 years leading up to the financial crisis, inflation as measured by the CPI will be 1.4% by the end of the year and just 1.1% in February, the month seen as the likeliest date for a rate rise.
With oil prices falling, inflation could be even lower, perhaps below 1%. That would leave Carney with the tricky job of having to write a letter to George Osborne explaining why inflation was more than a percentage point below target at the same time as he was putting up interest rates.
Finally, there is the subject of wages – touched upon in a speech by Ben Broadbent, one of the Bank's deputy governors at Jackson Hole. Broadbent said he had been taken aback by the weakness of earnings in the past year and that went for other MPC members too. Weale and McCafferty have to be able to show that the weakness of pay is temporary and that a surge is coming. The evidence suggests otherwise.
Border dispute
Taxpayers will have to foot the £220m bill for cancelling the e-borders contract with Raytheon; and so another government IT project slumps to abject failure. The concept is 11 years old; Raytheon won the contract in 2007; the contract with the UK Border Agency was scrapped in July 2010. Since then, much legal wrangling.
It's hardly as though this is the first; big government IT contracts have a habit of going bad, partly because of their size and partly because of the difficulty of getting public sector bodies to act with the urgency or agility necessary to get them to succeed. Either you have outsiders like Raytheon running them – in which case the interface between public and private is strained – or it's done internally, like universal credit, and people aren't used to the latest ideas in making big projects work, which is to split the work up and use "agile" development techniques.
To its credit, the government – led by the Cabinet Office, led by Francis Maude – has tried to learn from its many, many mistakes over the years, and is trying not to go for gigantic boil-the-ocean projects (if one puts universal credit aside for a moment). Instead it is breaking them down into smaller, coherent pieces of work that can be carried out without disrupting the smooth running of other systems.
This is how it's done in the private sector, where there's no better example than companies like Google and Facebook. Google, for example, made 890 changes to the way its search algorithms work last year; that's more than two a day. Each had to be tested and, if it was a failure for some reason, rolled back. Little steps put together make for giant progress.
Or in theory, at least. Business secretary Vince Cable has complained that after a giant outsourcing contract to handle his department's emails was taken away from Fujitsu and given to smaller suppliers, screens froze and emails arrived intermittently, bringing work to a standstill.
Clearly, there's a Goldilocks size – not too big, not too small – for IT projects that lies somewhere between universal credit (an oversized, overcomplicated mess) and Cable's emails (too small to split). Perhaps, in a few decades, we'll have found it.
Lidl fashion move is worrying
It has been causing a stir in the food market for a few years now, but it seems unlikely that Lidl's move into fashion will get the high street stores very hot under the collar.
The German discounter is pushing a limited range of clothing including faux leather jackets, jeans and shirts, at some very tempting prices. No doubt they will tempt some cash-strapped shoppers in search of a bargain. At £6.99 for a pair of jeans, customers won't be worrying about changing rooms or having to rifle through bargain bins for the size they want.
Still, with little room to spare for more permanent clothing displays, it's unlikely Lidl is going to grab a serious slice of the market. But what this move will do is get shoppers asking why they can't buy jeans for less than £7 elsewhere. That could put a further squeeze on fashion chains' margins and renew the temptation to get garments from the kind of cheap and risky factories we all hoped were going out of business.
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