Bernankeology

Why so much is read into the words of the Fed chairman.

Following Fed chairman Ben Bernanke's speech yesterday, the usual bout of trying to understand quite how much we can read in to his words has begun. Yet unlike the normally perjorative "Kremlinology" – attempting to infer things from the most minuscule turns of phrase – this Bernankeology is understandable and quite useful.

Central bankers have a strange job. They don't actually have many tools at their disposal; largely just the tripartite decision to raise, lower, or maintain interest rates. Yet many of the outcomes they create come, not from actually using this power, but from creating expectations as to their future use.

Suppose Bernanke knows he is likely to raise interest rates in the first quarter of 2013. Even though his actual power is relatively limited, he can create a wide spectrum of outcomes depending on how he announces this. The market reaction will be extremely different if Bernanke says now that he will raise rates in a years time, compared to if he maintains right up until the day that a rate rise would be inappropriate.

But this power to persuade brings with it its own problems. Just like a legislature, a central bank is fundamentally unable to constrain itself; it can make promises, but everyone knows that it is free to break them at any point.

All of this means that every speech Bernanke gives is likely to be very carefully aimed at creating just the right set of expectations. On the one hand, he can't ever gain a reputation for untrustworthiness, so they have to be scrupulously honest; on the other, actually saying what he believes may create the wrong impression.

Last week, Ryan Avent provided a detailed breakdown of exactly what the benefits of Bernankeology can be, focusing on the Fed's "forward guidance" where it hinted that it would keep interest rates low until at least 2013. He writes:

On the one hand, a pure focus on the language of the Fed's statement indicates that rates are likely to remain low through that period based on the state of the economy... On the other hand, the Fed may be hinting that it will be willing to keep rates low through late 2014 even if the trajectory of the economy warrants a rate increase.

In other words, the Fed might be attempting to commit itself to a deviation from its normal policy rules of the sort that might generate more rapid growth and inflation.

The problem the Fed has is that it needs to generate growth, but that growth is likely to come with relatively high inflation, of the sort which Bernanke has historically fought against. In order to help the economy, he needs to convince "the markets" that interest rates will be kept low even if inflation spirals out of control. The problem is that this, from an inflationary hawk like Bernanke, is unbelievable.

Avent points to a paper (pdf) which breaks down the distinction into two categories:

Delphic, corresponding to the first category above, and Odyssean, corresponding to the second, in which the central bank attempts to commit itself to deviations from typical rules.

Matt Yglesias offers a less refined version of the same strategy, breaking Bernanke's possible responses into an Eeyore response and a Tigger one. Either the Fed chief can "avoid optimistic forecasts as a way of signaling that rates will stay low for a long time," or he "can say we're climbing out of a steep hole so rates will stay low for the next 18 months come what may".

The test for Bernankeologists is to work out whether yesterday's gloomy speech is Odyssean-Eeyore, using gloominess as a mast to bind himself to, or simply Delphic, with the chairman making his most honest predictions and still being pessimistic.

Occupy LA activists march against the Fed in November. Credit: Getty

Alex Hern is a technology reporter for the Guardian. He was formerly staff writer at the New Statesman. You should follow Alex on Twitter.

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British mental health is in crisis

The headlines about "parity of esteem" between mental and physical health remain just that, warns Benedict Cooper. 

I don’t need to look very far to find the little black marks on this government’s mental health record. Just down the road, in fact. A short bus journey away from my flat in Nottingham is the Queens Medical Centre, once the largest hospital in Europe, now an embattled giant.

Not only has the QMC’s formerly world-renowned dermatology service been reduced to a nub since private provider Circle took over – but that’s for another day – it has lost two whole mental health wards in the past year. Add this to the closure of two more wards on the other side of town at the City Hospital, the closure of the Enright Close rehabilitation centre in Newark, plus two more centres proposed for closure in the imminent future, and you’re left with a city already with half as many inpatient mental health beds as it had a year ago and some very concerned citizens.

Not that Nottingham is alone - anything but. Over 2,100 mental health beds had been closed in England between April 2011 and last summer. Everywhere you go there are wards being shuttered; patients are being forced to travel hundreds of miles to get treatment in wards often well over-capacity, incidents of violence against mental health workers is increasing, police officers are becoming de facto frontline mental health crisis teams, and cuts to community services’ budgets are piling the pressure on sufferers and staff alike.

It’s particularly twisted when you think back to solemn promises from on high to work towards “parity of esteem” for mental health – i.e. that it should be held in equal regard as, say, cancer in terms of seriousness and resources. But that’s becoming one of those useful hollow axioms somehow totally disconnected from reality.

NHS England boss Simon Stevens hails the plan of “injecting purchasing power into mental health services to support the move to parity of esteem”; Jeremy Hunt believes “nothing less than true parity of esteem must be our goal”; and in the House of Commons nearly 18 months ago David Cameron went as far as to say “In terms of whether mental health should have parity of esteem with other forms of health care, yes it should, and we have legislated to make that the case”. 

Odd then, that the president of the British Association of Counselling & Psychotherapy (BACP), Dr Michael Shooter, unveiling a major report, “Psychological therapies and parity of esteem: from commitment to reality” nine months later, should say that the gulf between mental and physical health treatment “must be urgently addressed”.  Could there be some disparity at work, between medical reality and government healthtalk?

One of the rhetorical justifications for closures is the fact that surveys show patients preferring to be treated at home, and that with proper early intervention pressure can be reduced on hospital beds. But with overall bed occupancy rates at their highest ever level and the average occupancy in acute admissions wards at 104 per cent - the RCP’s recommended rate is 85 per cent - somehow these ideas don’t seem as important as straight funding and capacity arguments.

Not to say the home-treatment, early-intervention arguments aren’t valid. Integrated community and hospital care has long been the goal, not least in mental health with its multifarious fragments. Indeed, former senior policy advisor at the Department of Health and founder of the Centre for Applied Research and Evaluation International Foundation (Careif) Dr Albert Persaud tells me as early as 2000 there were policies in place for bringing together the various crisis, home, hospital and community services, but much of that work is now unravelling.

“We were on the right path,” he says. “These are people with complex problems who need complex treatment and there were policies for what this should look like. We were creating a movement in mental health which was going to become as powerful as in cancer. We should be building on that now, not looking at what’s been cut”.

But looking at cuts is an unavoidable fact of life in 2015. After a peak of funding for Child and Adolescent Mental Health Service (CAMHS) in 2010, spending fell in real terms by £50 million in the first three years of the Coalition. And in July this year ITV News and children’s mental health charity YoungMinds revealed a total funding cut of £85 million from trusts’ and local authorities’ mental health budgets for children and teenagers since 2010 - a drop of £35 million last year alone. Is it just me, or given all this, and with 75 per cent of the trusts surveyed revealing they had frozen or cut their mental health budgets between 2013-14 and 2014-15, does Stevens’ talk of purchasing “power” sound like a bit of a sick joke?

Not least when you look at figures uncovered by Labour over the weekend, which show the trend is continuing in all areas of mental health. Responses from 130 CCGs revealed a fall in the average proportion of total budgets allocated to mental health, from 11 per cent last year to 10 per cent in 2015/16. Which might not sound a lot in austerity era Britain, but Dr Persaud says this is a major blow after five years of squeezed budgets. “A change of 1 per cent in mental health is big money,” he says. “We’re into the realms of having less staff and having whole services removed. The more you cut and the longer you cut for, the impact is that it will cost more to reinstate these services”.

Mohsin Khan, trainee psychiatrist and founding member of pressure group NHS Survival, says the disparity in funding is now of critical importance. He says: “As a psychiatrist, I've seen the pressures we face, for instance bed pressures or longer waits for children to be seen in clinic. 92 per cent of people with physical health problems receive the care they need - compared to only 36 per cent of those with mental health problems. Yet there are more people with mental health problems than with heart problems”.

The funding picture in NHS trusts is alarming enough. But it sits in yet a wider context: the drastic belt-tightening local authorities and by extension, community mental health services have endured and will continue to endure. And this certainly cannot be ignored: in its interim report this July, the Commission on acute adult psychiatric care in England cited cuts to community services and discharge delays as the number one debilitating factor in finding beds for mental health patients.

And last but not least, there’s the role of the DWP. First there’s what the Wellcome Trust describes as “humiliating and pointless” - and I’ll add, draconian - psychological conditioning on jobseekers, championed by Iain Duncan Smith, which Wellcome Trusts says far from helping people back to work in fact perpetuate “notions of psychological failure”. Not only have vulnerable people been humiliated into proving their mental health conditions in order to draw benefits, figures released earlier in the year, featured in a Radio 4 File on Four special, show that in the first quarter of 2014 out of 15,955 people sanctioned by the DWP, 9,851 had mental health problems – more than 100 a day. And the mental distress attached to the latest proposals - for a woman who has been raped to then potentially have to prove it at a Jobcentre - is almost too sinister to contemplate.

Precarious times to be mentally ill. I found a post on care feedback site Patient Opinion when I was researching this article, by the daughter of a man being moved on from a Mental Health Services for Older People (MHSOP) centre set for closure, who had no idea what was happening next. Under the ‘Initial feelings’ section she had clicked ‘angry, anxious, disappointed, isolated, let down and worried’. The usual reasons were given for the confusion. “Patients and carers tell us that they would prefer to stay at home rather than come into hospital”, the responder said at one point. After four months of this it fizzled out and the daughter, presumably, gave up. But her final post said it all.

“There is no future for my dad just a slow decline before our eyes. We are without doubt powerless – there is no closure just grief”.

Benedict Cooper is a freelance journalist who covers medical politics and the NHS. He tweets @Ben_JS_Cooper.