The Guardian has reported this morning that:
Jacob Rees-Mogg has accused the Bank of England of “miserable incompetence” over its failure to reduce inflation more quickly and its bond-selling strategy, as rightwing Tories prepare to renew their attacks on the Bank's independence.
The former business secretary accused the Bank of damaging the economy with its interest rate decisions and costing the taxpayer tens of billions of pounds by selling off government debt too quickly in an attempt to reduce its balance sheet – a policy known as quantitative tightening (QT).
I hate to say it, but he's right.
He's also right to suggest that, incompetent and bizarre as Lis Truss's budget in September 2022 was, it was the Bank of England that caused the financial crisis during the weekend that followed it, with its announcement of unprecedented QT, which failed to take into account its impact on pension funds.
Dire as Tory economy management has been - and dire is in many ways too kind a word to describe it - the Bank of England has been much worse.
I don't agree with Jacob Rees-Mogg on almost anything else, but on this issue, he is right. The Bank of England, as it now operates, with its current leadership, is the most massive threat to our well-being, with Labour ranking as the second biggest threat because it says it has no intention of changing the way in which the Bank operates so that life might be made better for the vast majority of people living in the UK.
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It’s time to consider revoking the Bank of England’s “independence”, The New Statesmen, 6 May 2022
https://www.newstatesman.com/politics/economy/2022/05/its-time-to-consider-revoking-the-bank-of-englands-independence
“It’s time to ……revoke ..the Bank of England’s “independence”
There, fixed it for you. As usual the New Stateman coming out with timid stuff.
Want to reduce the Chinese politburo to hysterical laughter?
Suggest that their Central Bank should be “independent”.
What an excellent analysis that is.
Should be essential reading for Mogg, and Reeves….
Jacob Rees Mogg admitted that government borrowing was ‘government borrowing from itself’ when he was supporting Liz Truss’ plans to borrow for tax cuts to the rich
The world has gone completely mad.
Natalie Elphicke is accepted by the Labout party as an acceptable MP, despite all the views that she has previously articlated being complete anathema to Labour party members, while Jeremy Corbyn and Diane Abbott cannot, apparently, be Labour MP’s because each has said something that may have been badly phrased or at the most, represented a single unacceptable opinion.
And now Jacob Rees-Mogg has said somethign that I agree with.
Mad.
But not for the first time, I’m sure https://www.progressivepulse.org/economics/probably-the-most-important-sentence-mogg-has-ever-uttered
I find it difficult to agree with most of Jacob Rees-Mogg’s opinions. Such shocks as agreement with him should however remind us of something far more important. It is ideology that drives people to expect to the expectation of agreement with a politician (or indeed anyone) about every issue. Ideology is always false. Politics only works where we have lower expectations of uniform agreement, and accept that we find our solutions through negotiation and compromise. Assumption or expectation is the parent of disappointment: the world is too complicated for such political short-cuts to understanding the reasoning, the unreasoning or the values of others.
The madness is in the ideology. Ideology is the poison of the 20th and 21st centuries. Agreeing with Jacob Rees-Mogg unexpectedly is simply the reality. It may well be the only common ground you ever share with him; provided you remember that whether it is, or not is itself a permanent contingency. What matters is what can be achieve constructively out of agrrement, as far as it takes us.
HI Cyndy,
I would like to point out that nothing either Jeremy Corbyn, or Diane Abbott said, was either unacceptable or badly phrased. It is simply that those that sought to demonise them, used their supporters in the MSM to tell you that what they said was unacceptable (no doubt you will have seen the words and phrases used).
It is important that these lies are called out for what they are, and those who created and promoted them, are given no credence, whatsoever.
Regards
Sean
That is why I said ‘apparently’
Yes you’re right it has all the hallmarks of madness. Hard not to view politicians as serious people more children jostling to be leaders of their gang!
Thank you and well said, Richard.
When Truss and Kwarteng spoke about reform of the Bank, I thought if that came to pass, progressives should mobilise and support that effort, but bring their own ideas to the table.
On his way out, early teens, deputy governor Paul Tucker suggested reform, if not the end of operational independence, was needed. This was more to do with the macro-prudential authority central banks were given after the 2008 crisis and the impact on even social policy such autonomy has. In January 2020, I attended a City event Tucker and Robert Skidelsky spoke at in support.
Trade unionists I have spoken to don’t seem interested. Is it a lack of understanding? When I mentioned that no British labour representative had ever sat on the monetary policy committee, one mentioned Bill Morris. I had to explain Morris was on the Court, not the MPC.
The union’s lack of interest is bizarre
I have tried to engage with those in the supposed know there and the on ly response is ‘we’re trying to keep in with Labour’, who are not trying to keep in with them.
Thank you, Richard.
I did not hear that explanation. The engagements I refer to were between 2008 – 14, so one would have though labour would have sensed and seized an opportunity to widen the Overton window, if not move it left.
It’s not just in the UK, ETUC officials were no better.
Meanwhile in the bowels of Pacific Quay the hapless BBC Scotland Newsroom interviews the Scottish FM, John Swinney on the GMS programme; and the interviewer (Laura Miller, I think?), seemed to think it would be a smart move to ask him him what he is going to do about Corporation Tax; obliging the earnestly accommodating, compromise seeking leader of the Scottish Government (courteous and polite debate is part of his political pitch,) to explain very gently to the ‘journalist’ that Scotland has no powers over Corporation Tax. The interviewer ignored the signal, and then proceeded to stumble around inarticulately looking for an easy, acid, sound-bite point to score over him, but there is really no recovery to be made from such an abject display of ignorance of the basic professional brief; but apparently determined to remain showily hostile in her questioning (the Unionist listeners have minimum expectations, after all); she settled on the somewhat old news of the 5th May Panelbase poll, that the SNP could lose 28 seats in the Westminster general election; cheap, and ineffective no doubt, but it served the minimal purposes to which BBC Scotland is now reduced.
That really is crass interviewing
I noted this in the Guardian article
“Unlike other central banks, however, the Bank has decided not to let the bonds it holds expire naturally, but instead to sell them into the private market more quickly, with any losses incurred being footed by the taxpayer.”
Bonds expire naturally?
As I understand it, a bond has a maturity date and is redeemed with a payment to the owner. So if the government owns the bond, it need not pay itself -which would be a book keeping exercise-but just let the liability go into history like Confederate dollars in the Western movies?
If so, why all the ‘burden our grandchildren’ rhetoric?
You understand that
So do I
Why is anyone claiming otherwise?
Perhaps, since the bonds have essentially been cancelled when they were purchased, the BoE’s remit should be changed so that it may not sell bonds once it has purchased them.
I guess there are better, overall, changes to the remit that could be made. But, like Richard’s TWR, this is minimal change to the existing status quo.
It wouldn’t prevent the BoE from selling bonds. It could still sell new bonds. But at least it would stop the silliness of reselling bonds that have already been cancelled.
It’s an idea worth considering
I suspect that the BoE policy of QT is just the politics of CB independence. They are trying to demonstrate to the market that they have the power they have. Probably stung by jibes from some market participants that the BoE in the recent past was too openly funding govt without the involvement of the gilts/debt market.
The fact that the BoE supported failing pension pots big time after Truss’ misery proposed by her truly incompetent chancellor showed clearly that the BoE plays games on the public market far, very far indeed from its supposed independence.
You say the Bank is responsible for the financial crisis following the mini budget. The Bank announced its QT, which is a big selling of bonds. The next day the mini budget contained massive tax cuts that would be covered by a borrowing, i.e. a big selling of bonds.
My understanding at the time was that it was a combination of the flood of bonds from both the QT and the extra borrowing that crashed the economy, i.e. the Bank and Truss were jointly responsible. Why do you say that it was only the Bank that caused the crash?
Because it was the deliberate threat to change interest rates that had the impact on markets and that came from the BoE
Richard, I understand your point but and it’s just a small one, HMT have 2 voting reps on the MPC. So the Treasury if not the Chancellor are involved in the BoE decision at the time.
But Kwarteng claimed the plan was not communicated
Who knows?