The FT notes this morning that:
The UK is at high risk of a serious economic downturn next year, one of the world's biggest active bond fund managers has warned.
They added:
Daniel Ivascyn, chief investment officer at Pimco, told the Financial Times that “In the case of the UK — a smaller, open economy, with a consumer that's feeling the brunt of central bank policy far more than their US counterparts — you just have a higher probability of more significant economic deterioration. We do think there's potentially more hard landing risks.”
I am aware that I say, quite often, that it is the policy of the Bank of England to create a recession in the UK. I do so for two good reasons.
The first is to warn about what is coming.
The second is to evidence that I said it was coming.
Both are necessary if we are to eventually appreciate that the Bank will have done more harm than either Covid or inflation did by the time this will be over.
In that context, it useful to note that I am not alone in thinking that the Bank has gone too far.
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The past 25 years has shown that Brown’s decision regarding so-called Bank “independence” in 1997 was a mistake. It allowed politicos to claim that problems caused by BoE policy (the one described by you & others) is nothing to do with politicians (bowl of water, towel and soap pulled up).
Giving central banks “independence” is thus either the action of cowards or an admission by the body politic that it does not know enough to give a central bank direction. Probably a combo. It is worth noting that following a quarterly report by the BoE in 2014 (where does money come from), the house of commons held a debate on the subject. By the usual standards of the house it was unusually interesting & worth watching. It was also the first on the subject in circa 100 years. Thus I’d suggest that politicos for the most part don’t know enough and in turn abrogate responsibility. If this is the case, then its time to elect at least some politicians that do – & which are capable of seeing through the smoke and mirrors show that is the modus operandi of most central banks.
Do you have a Hansard link, or date?
I’ll take a look, it’ll be there somewhere.
It was definitely in response to the Q1 bulletin. So probably in the 1st part of the year.
Interesting factlet – the debate actually noted that this was the 1st time in circa 100 years that such a debate had been held.
The key is constructing a narrative that central banking is not a matter for politics, but exclusively of professional bankers; as part of the neoliberal professionalisation of money and economics, to detach it from politicians, as amateur and ill-equipped to understand the issues, or make the big decisions. The whole marketisation of everything a Government spends follows the same process. After all, it is the core of the neoliberal Chicago, Austrian and neo-Walrasian neoliberal agenda. The Public is the entitled, ritual sacrificial offering to the Private.
The next step practical step in neoliberalism is to close off all scrutiny of private market enterprise from politicians; finally and comprehensively. This is decisively sealed by the most senior politicians. Take the PM’s appearance, today in front of the Liaison Select Committee. Asked about the Rwanda policy, he was grilled over what aeroplanes had been contracted to fly refugees to Rwanda (apparently the questioner, Dame Diana Johnson, Labour MP was fairly confident that no airline will touch a contract, because of the likely ‘reputation damage’). Sunak evaded the question, simply by claiming ‘commercial confidentiality’. The Private is off-limits, sacrosanct, untouchable territory, even to Parliamentary scrutiny.
The marketisation of Government is slowly closing off the political scrutiny of contracts, to protect the interests – not of the public – but the financial and market interests – of the contractors. We are going round in ever decreasing circles. Finally all scrutiny of the public being systematically being ripped-off by ‘the market’ for monopoly profits; will disappear down the plug hole; forever.
The end of political financial scrutiny of private enterprise is the end of politics in a 21st century world.
I remember last year signing up to quite a few petitions to stop the flights to Rwanda. Some were sent to airlines to say we would not fly by their planes if they continued. It ended with only one airline being willing to take them, but that plane never got off the ground.
ta-da.
https://www.youtube.com/watch?v=EBSlSUIT-KM
Thanks
Interesting youtube. Obviously the tory MPs think they know it all as most of them walked out when Steve Baker started.
Evidently so, when of the few that remained, you have two Tories chime in, one of whom is clearly completley confused in his interventions, the other of which insists that things are improving.
That debate made me feel sane, seeing others speaking common sense, and yet it was maddening; This sort of critical thinking of the current social, economic, and political order has essentially been completley expelled from the Westminister consensus, it seems. We are now only to have clones of Cameron running our government until these islands sink.
So maddening that this matter was never revisited.
Looking once more at the present, there is also something depressing about seeing Martin Wolf go from suggesting a nationalized money supply around a decade ago, to now promoting a murderous policy of surpluses.
One cannot help but wonder how many more will be killed before we put a stop to all the economic terrorism.
The Tories in this debate were utterly bizarre. They wished to deny the state the chance to create money.
Here is the Bank of England Quarterly Bulletin for 2014 Q1:
https://www.bankofengland.co.uk/quarterly-bulletin/2014/q1/money-creation-in-the-modern-economy
And here is the debate in Hansard on 20 November 2014
https://hansard.parliament.uk/commons/2014-11-20/debates/14112048000001/MoneyCreationAndSociety
Many thanks
It sounds like you have this picture in your head of when central bankers meet:
“Good Morning gentlemen and lady, today’s agenda is to engineer a recession”
‘
“To show that Professor of Accounting Practice Richard Murphy can be right for once”
The last is obviously absurd
The first is true. That is the goal of rate rises. Don’t you get that?
So, how else does a hike in interest rates reduce inflation?
Dalston Dale? Is that Durham or Yorkshire Dales?
Yesterday, the Guardian reported that Ben Broadbent, from the Bank of England, said that we needed a clearer decline in wage growth before lowering interest rates.
Irrespective of whether wages are actually a cause of inflation, this is crazy. For clarity, wages lag inflation and are, therefore, unlikely to be causal.
What he’s saying is that the BoE is reactive to current economic statistics. But, they know that interest rates have a significant lag (18 months?) before their full effect is felt. What they should be doing is trying to be proactive and predict where the economy should be, not reacting to where it is now. Of course their predictions are often hopelessly inaccurate.
Sometimes, of course, when it suits their narrative, they do say that they have to respond to where the economy will be in the future. But at the moment, apparently, they have to wait until criteria are reached before reacting.
Of course this means that the economy will overreact. In this case as you, Richard, so rightly and repeatedly say, this will lead to recession. They know this.
There is a whole body of engineering theory devoted to controlling systems. Controlling systems with lags is particularly difficult. But the BoE are going about it in more or less the worst possible way. A student of control engineering would be failed if they suggested controlling a system with lags in this way. Perhaps some BoE economists should have some continuing professional development in control theory.
Better still, you should use controls which don’t have lags. Such controls exist. They are fiscal policy. For example, reducing VAT, would immediately reduce inflation. Zero lag.
Which comes back to the original point. The BoE know they are wrong and that recession will ensue. It doesn’t need to be this way (TINA is wrong).
Your second para is spot on Tim
Seems to be further proof that this is about punishing workers because they’ve been taught that uppity workers
cause inflation.
People in the MPC have reached their position in two ways:
1) Being a banker with connections
2) Being an inoffensive civil servant who is good at keeping elected officials pacified
Neither act in the national interest. The former acts in their commercial interest, while the latter in their own political interest.
Principal Agent problem.
Central Bank Indipendance is built on the myth of “natural” interest rates, and it needs to end.
It’s not just the BofE going too far; the new criminal justice bill means cops can stroll into your place, or my place, or any place, any time, and waltz off with your stuff, no warrant needed. Difficult not to think this new power will be routinely deployed against anyone categorised as political opposition which means most of the regulars here for a start. Sonia Poulton discusses the implications of this and the new surveillance bill (the bit about new police powers is at 19 minutes in but do watch the whole thing) https://www.youtube.com/watch?v=StZB0tlGuY8
Thanks to all for the Hansard references.
Steve Baker – what a piece of work – a total loose cannon who somehow did progressives a real favour by getting this to be discussed at all.
I look forward to reading this in depth.
Tim’s opening statement seems to suggest to me that the BoE is in cahoots with the Tories with regards to its policy of austerity.
Reducing wages goes hand in hand with austerity throughout history.
Therefore the BoE actually intends to undermine the employment market by harming/destabilising the wider economy.
Great!
On the subject of the Bailey-led BofE being in cahoots with anyone… there’s some observations on his history from the busy peeps over at https://www.lloydsbankassetfrauds.com/ in their PDF download entitled “Challenging the Bailey Appointment” containing information which I knew of generally anyway but might be news to some folk. It all seems reasonably referenced so probably worth a peek for some….
Thanks Bill – very useful information for us all.
Having had some exposure to the people at the BofE, I don’t think its anything as complex as a conspiracy. Its just that they are full of the kind of economists who know only the most orthodox of economics and are incapable of thinking in any other way. They would be marginalised if they did. Their minds would boggle at the idea of control theory or of complexity as per Steve Keen.
Where I suspect there is intervention is in the appointment of the members of the MPC who make the interest rate decisions based on what the Bank puts in front of them. Applying their own prejudices…
Are you aware of Bailey’s reputation for Nelsonian activities at the FCA, this in relation to alleged serious and consistent wrongdoings carried out by elements of the financial sector, banks especially? Some thought these evil deeds stuck out a mile, but Bailey, somehow, couldn’t see them. There are those who suggest this is why he got promoted to BofE Governor, the whole financial edifice being corrupt and self-supporting. The BofE may well, being a broad church, number among its ranks those so sheltered they actually believe in neoclassical economics. I doubt, given his past behaviour, Bailey is among them.
And, in the vernacular; to put the Tin Lid on it, Sky News reports:
“Sir Robert Chote, the chair of the UK Statistics Authority (UKSA), said the prime minister’s assertion that ‘debt is falling’ may have caused ‘confusion’ and ‘undermined trust in the government’s use of statistics’.
Reducing debt is one of the five pledges Mr Sunak made to the public at the start of the year, alongside cutting NHS waiting lists and ‘stopping the boats’.
He claimed ‘debt is falling’ in a video posted on social media after the King’s Speech on 7 November and that ‘we have indeed reduced debt’ at Prime Minister’s Questions on 22 November, the day of the Autumn Statement.”
The Tin Lid is here:
Number 10 had argued Mr Sunak was referring to a projection that debt would be falling as a proportion of GDP by 2028″. (Sky News).
Please note that even that last statement; a projected forecast that is little better than a pure guess, for a very, very large financial number in an uncertain and volatile world, five years hence (or it is just his Micawber moment), is not even true; since the debt as a percentage of GDP may indeed fall in 2028 (or may not fall); but notwithstanding any Debt%/GDP fall, at the same time the actual quantum of debt that statistic represents may not fall (such is the deadly and often misleading trickery of using statistics in measuring money). He is not stupid enough not to understand, or he is playing on two meanings of “debt is falling” without disclosing which one he actually intends; but Sunak seems to think he can treat the British public as if they are very, very stupid.
We really cannot go on like this; kicking the can down the road to some unspecified election date that could be another year of this disaster; when it is already far too late for everyone’s wellbeing to be rid of this appalling apology for a Prime Minister (actually five PMs – all useless, or worse since 2010), and a government both reprehensible and thoroughly bad.
With regard to the stupidity of the British people, even in acknowledging the effectiveness of the Right to campaign and raise money, I still find myself surprised people will still vote for the Tory party at all.
But there you go………………