As the FT has reported this morning:
So, given a choice, Rachel Reeves has chosen to favour banks when there is near universal agreement now that some saving could be made in the payment of interest on central bank reserve accounts with the effectiveness of monetary policy (if that is necessary) being maintained.
Her choice favours banks, while she claims there are no funds available to end child poverty. She could do this for maybe a million children hit by the two-child benefit cap at a cost of less than £2 billion a year, which could be provided many times over by just limiting these interest payments.
Reeves would rather favour banks than. children in poverty. That's what we need to know about the forthcoming Labour government.
But that is also why it will fail.
Thanks for reading this post.
You can share this post on social media of your choice by clicking these icons:
You can subscribe to this blog's daily email here.
And if you would like to support this blog you can, here:
Labour = neoliberalism mark 2
1.1
I don’t pretend to understand much about the financial workings of the City but I thank you for at least giving me an insight into it and helping me to develop that understanding. Your article on the reserves held at the BOE was revelatory to me and this reaction from Rachel Reeves is equally revelatory. I only hope that early failures in Labour policy will cause a re-think and more input from the left of the party (if there is any left left). Thank you for your daily efforts, which are much appreciated.
Thanks
Thank you, Mike.
The City’s financial workings can be summed up as rent extraction, privatising profit, milking subsidies and nationalising risk and losses.
Reeves is an unreconstructed and unreformable bankster. She often talks about her BoE background, but rarely, if ever, her next gig, soon to be bailed out HBOS.
Her family connections helped with getting a safe northern seat.
Richard has said better than me before, “Put a BoE person in charge and get BoE thinking.”
HI Richard,
That seems to me a straight forward attack the Greens could use in the upcoming debates. I hope they are following this blog.
Regards
I hope so too
Interesting to see what Reform make of it too seeing as changing this situation is among their stated policies. Let’s hope they steam into Reeves on this one.
This demonstrates that Reeves is a wholly-owned creature of banks – be they the BoE or commercial banks.
Mr Warren made a very interesting comment the other day – about the origins of Trump – Tea-Party and the reality that Obama, nice man that he was, saved Wall Street rather than Main Street. The same is happening here. The blog has repeatedly warned about the emergence of fascism, Reeves is busy laying the foundations. One could call her an imbecile – but I think that would be too kind.
Thank you and well said, Mike.
We have watched this film, not just in the US, but in France, too, where centrist darling Macron, mythologised as “le mozart des finances” by the French oligarch owned media, much to the amusement of banksters who know about him, has paved the way for the Le Pen family.
Mike is right to point out Reeves and her bank backers. She comes from that world and shows it. Mike is also right to highlight 2008 and the response to it.
I was at the City’s main trade body from the spring of 2008 and worked with stakeholders around the world, including US regulators and took a keen interest in US matters. A few days before Citi’s nationalisation (“conservatorship” as nationalisation is a swear word in the US unless its for risk), colleagues and I were briefed on it by US officials as market reaction needed to be gauged.
Let’s start with Obama’s cabinet as per https://wallstreetonparade.com/2016/10/wikileaks-citigroup-exec-gave-obama-recommendation-of-hillary-for-state-eric-holder-for-doj/.
When Obama ran for the state, not federal, senate, some black activists called out his property developer backing. Obama married a Daly family precinct captain’s / Democrat Party machine daughter. They still are as Obama tries to get his “presidential library”, or not as it really is, built.
For his run in 2008, Obama raised more money from Wall Street than his opponents, as per https://www.politico.com/story/2009/01/wall-street-invested-heavily-in-obama-017643.
Sheila Bair*, head of the US depositor protection and bank liquidator body (FDIC), had long rang the alarm about Citi and wanted the bank broken up and refocused on domestic finance. Bair, a Republican from Kansas, also wanted much bolder reform. Obama wanted nothing to do with any of that, a missed opportunity, and put an east coast Democrat, Martin Gruenberg, in charge.
In 2009, Obama’s adviser Christina Romer* wanted a bigger package and one aimed at Main Street, but Obama was swayed by the likes of Tim Geithner, Robert Rubin and Larry Summers.
Romer and Bair were sidelined. That reminded me of CTFC boss Brooksley Born* raised the alarm about derivatives and commodity trading in the 1990s and Clinton, again advised by Rubin, Summers and Geithner, sidelined her and even had a law enacted to prevent regulation.
*All women and ganged on by alpha males.
We are still living with the consequences of 2008 and even the Clinton regime. Wall Street deregulation took off under Clinton, which influenced Blair and Brown. The Clinton regime’s dodginess is for another discussion.
But LINO are not going to even mention the 2-child benefit cap before the election because that might remind the Scottish electorate that the SNP (who have abolished the cap here) have not been doing an altogether bad social democratic job in Scotland.
With a LSE and BoE pedigree I would (sadly) expect nothing else from Rachel Reeves.
My only quibble is that reducing child poverty could/should be done whether or not interest on Reserves is paid. Indeed, this needs tackling on Day 1 of a new government and not wait for any resolution of the Reserve Remuneration issue.
Having said that, it is a snappy juxtaposition “poor kids or bankers?”.
Fair comment…
But I am working to her agenda
Its a straightforward moral issue that Labour fails on miserably
What is it about Oxford PPE that generates such incompetent (or malicious) politicians? Cameron, Hunt, Sunak, Reeves, …
I can only repeat what I said yesterday at the end of another thread. “ Meanwhile, the 5 Giants [want (caused by poverty); ignorance (caused by a lack of education); squalor (caused by poor housing); idleness (caused by a lack of jobs, or the ability to gain employment); disease (caused by inadequate health care provision) – BBC] still stalk the land – though we may frame them differently now – and not one politician has the conviction to address this abject failure of politics to provide fairly for all citizens. Tens of thousands of food banks and giving out millions of food parcels is now considered normal and a symbol of a caring community, rather than the failure of an uncaring government.
What we need is a caring government”
A very quick read of what Beveridge had to say about Want is so up to date and insightful. Basically, no one should have so little that they are unable to subsist, while today a recent report said many of us face destitution. In 80 years we still have people hardly able to subsist and a government plus the one in waiting just doesn’t care.
https://www.nationalarchives.gov.uk/wp-content/uploads/2014/03/prem-4-891.jpg
I don’t get the impression that Reeves is a really bright economist able to consider and analyse different ways of looking at the economy – even if coming down ultimately on the wrong side.
She seems very limited and cautious – almost not daring to think – but being deliberately very narrow minded, repeating the well worn – ‘I was at the Bank’ etc – and having to plagiarise (‘inadvertently missing references’) for her book.
So when the inevitable crisis hits – she wont have the confidence to think outside the box – and ‘find’ money to invest in NHS etc.
The Czech National Bank stopped paying interest on reserves to commercial banks in 2023 without significant disruption. In that case it was the central bank itself that was responsible for payments and had to manage its balance sheet accordingly – a claim on the Czech Treasury was part of that only in extremis. Andrew Bailey’s various arguments against a policy change are all disproved by the Czech experience – and his views would be quite different if these interest payments fell on the BOE rather than the Treasury. The UK is entirely out of line in this area – and has the worst possible policy in terms of the impact on government finances.
Thanks