I fail to see how anyone can claim that the Fed or the Bank of England have been well run in recent years. We have just lived through the biggest boom and bust in money policy we have ever seen. The two main Central Banks that caused the blow up and then supervised the collapse should take the blame.
I appreciate Mr Bernanke was not primarily responsible for the build up of excess credit, but he was responsible for the bust phase. He should be replaced with someone who forecast the recession and demanded earlier action to deal with it.
January 25, 2010
Does the logic of your article not also demand Mr King and the MPC also be sacked?
Reply: I have made no secret of my wish to see changes at the MPC!
January 25, 2010
I also think that Mr King should have already gone, together with the MPC and the the financial regulators
Clear the boards to signal a new beginning
But then I would have let the banks fail too, as the only salutary lesson that the capitalist bankers would understand. The system would have rebuilt itself by now and we'd have competition. The toxic debt would have been isolated, and all those profitable bits from HBOS and RBS would have been plucked
We are where we are, and the zombie banks must pay us back before we cast them out and never ring fence their exploits again
January 25, 2010
JR: "I appreciate Mr Bernanke was not primarily responsible for the build up of excess credit, but he was responsible for the bust phase."
Bernanke makes much of his study of the Great depression. I did not realise he did so to better replicate the conditions of the last century GD as soon as possible this century.
This one shoud be called – The Greenspan Benanke depression.
January 25, 2010
Ben Bernanke was first appointed chairman of the Fed by President Bush and nominated for a second term by President Obama. He has been criticised for not seeing the recession coming, reducing interest rates to almost zero, steering the Fed to finance the mortgage market, and burdening the US taxpayer with huge bills for bailouts. The parallels with the UK Treasury’s behavior are obvious. Like Gordon Brown, he talks up the economy (which is part of his job) – it’s always jam tomorrow. But the question remains, can any nation borrow and spend its way out of a recession?
January 25, 2010
Citizen Responsible: "can any nation borrow and spend its way out of a recession?"
Japan has a head start on us. They have been trying to stave off the recession for a decade now.
Like us they have accumulated huge public debts, like us their demographics are unfavourable with an ageing population and declining tax base leading to greater demands on the public purse.
They have at least one advantage we do not, their population is still relatively homogenious, they may find commonality in a crisis and pull together, ours is already fractured along ethnic, religious lines.
I fear we will find out which model is best fitted to deal with a crisis. A homogenious monocultural society like Japan, or the engineered hetrogenious multiculti society the Socialists have wrought for us here.
January 25, 2010
Amen to that.
Mervyn King should walk away too. Helicopter Ben, I think he only knows how to print money…
January 25, 2010
As I have said before, Governors of Central Banks should not be economists. If they were "political economists" it would be alright, like my former boss the late Per Jacobsson – such a wise man. Modern economists, like "climate scientists", are too hooked on computer models and lack common sense. Thank God I didn't have a computer when I was Head of the Economic Section of the Bank of England in 1963/5.
January 26, 2010
Guy de Moubray
Hooray, another person who believes that computers do not have to rule your personal life or work.
Clearly you are of an age when you learnt mathematics at School, before calculators were allowed. Thus when you eventually used a calculator no doubt you also completed a quick mental arithmetic check to confirm the calculator was correct, as I did and still do.
If you put the wrong figures into the calculator by mistake or by error, then your own mental arithmetic check confirmed the wrong answer given by the calculator, so you entered the figures again, the second time more carefully to double check the calculation once more.
The problem today is that few of the younger generation check a calculator answer, and simply accept what it says, without question.
The same goes with computer input, and the results that it spews out. IT MUST BE RIGHT, IT SAYS SO ON THE SCREEN, irrespective that an error may have been made at the imput stage.
Computers have their uses, but blind reliance on them is very unwise as we are now finding to our cost.
Thank you for your input.
January 25, 2010
Nouriel Roubini for Fed Governor? Perhaps Willem Buiter for the BoE? Not that I'm sure you'd be overly enthusiastic about their prescriptions for solutions.
January 25, 2010
The Bank of England should be changed to at least ensure they understand real life markets. When Mr King took over, he cleared out anyone who didnt have a masters in Economics and shifted the funding to only looking at internal economic models.
This is why they have no clue as to what they are doing, its all computer models which although very complicated are unbelievably simplistic in comparison with reality.
January 25, 2010
Seems an interesting point. But would the markets react well?
January 26, 2010
The MPC experiment here in the UK has clearly not worked very well at all. With core inflation now running at 3% and interest rates still effectively at zero, I would say that the MPC has failed dismally in its remit. One of the problems, of course, is the naive idea that it is an 'independent' committee. Five of them are Government employees, and the other four (the external members) are appointed by the Chancellor. So much for their hollowed independence. I'm afraid that it's time to think again. I would not like to see a return to the old days where the Chancellor decided on the interest rate appropriate to the current political environment, never mind what the economy is doing. But one must admit that the abject failure of the BoE, MPC, and Treasury to understand that for more than a decade China has been exporting deflation to the West, allowing interest rates to be kept foolishly low for far too long, thus encouraging manic borrowing and speculation, makes it a failed experiment. Why not simply get rid of the MPC and the BoE's base-rate setting farce as far as possible, and allow markets to set interest rates instead. To some extent, this is already happening (e..g. Skipton), but the process needs to be encouraged and accelerated.
As for Bernanke – well I agree that he is inept and appears to be far too politicised, but while we are firing him can we please do something about the real cause of the problems, Alan Greenspan? He has had all the luck of Tony Blair as fas as timing goes, and yet he is directly responsible for interest rates being kept too low for too long, as well as for the moral hazard that banks and markets now take for granted as part of their trading environment. Greenspan should be pilloried and stripped of all awards and respect, and know henceforth as the Father of The Slump.
January 27, 2010
Mr Bernanke is not our responsibility. Mervyn King is. I know that he talks a lot of sense from time to time. The problem is that he didn’t act when he knew that the house price bubble was unsustainable; instead of issuing little warning messages, he should have raised interest rates.
January 27, 2010
I only discovered recently that the FED is privately owned unlike our own Bank of England .
Just like all regulation and rules , their written constitution which was meant to protect them against such abuses is only as good as it's enforcement .