The lessons from Canada

 

We are all fans of Canada now. The outbreak of cross party support for the appointment of Dr Carney to the Bank of England was based on enthusiasm for the way Canada got through the last boom and bust crisis in much better shape than the UK. There were no failures of major banks, a smaller drop in output and a much quicker recovery. So we need to ask what were the magic ingredients behind this success?

It was not just better Central banking, though that did help. The Central Bank of Canada did make enough liquidity available to banks at a time when the Bank of England was preaching moral hazard and watching banks go bust as a result. Today Canada has an official interest rate of 1%, and an inflation rate below the 2% target. It was also the state of the Canadian public accounts. that helped Canada through the Credit Crunch.

Canada had followed a path of spending and borrowing too much, leading to an earlier crisis. A fundamental review of public spending was undertaken and substantial cuts pushed through. Following this adjustment, the economy started to perform better. The UK Conservatives studied this in oppposition, but have not been able to do something similar in a Coalition government.

In 2011 the figures show that Canada’s public spending as a percentage of GDP was 39.7%, compared to the UK’s 47.3%. Keeping public spending under better control before and during the crisis clearly limited the damage from international events and allowed a swifter recovery.

In 2011 tax revenues amounted to 32.2% of GDP, compared to 38.9% in the UK. Canada’s economy benefitted from lower rates of tax and less tax being raised by fewer taxes. The UK’s level of taxation was 6.7% of GDP higher. Canada’s top rate of federal income tas was just 29%, compared to the UK’s 50%. It comes in when incomes rise above $132,000. Even adding in state income taxes, Canada’s income tax levels provide a top rate of around 40%, not 50%.

Canada has been running a smaller deficit and building up debt less quickly.

The Canadian economy was assisted by sensible Central banking across the crisis,, but performed better for a range of reasons. Lower tax rates, better value for money public spending, and better control of state debt levels were important factors in the success. Can Dr Carney help persuade more UK politicians of the wisdom of such a policy package?

Canada is now generating 7% more output than before the crisis, whilst the UK, Japan and the Euro area are still below 2007 levels. The Canadian economy has grown in every quarter save one since 2010.

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108 Comments

  1. Adam5x5
    Posted November 28, 2012 at 6:42 am | Permalink

    So inflict a lower tax burden on businesses and people, allowing them to spend their money as they want to and there will be more growth and a healthier economy?

    Who’d have thunk it?

    Lower tax rates, better value for money public spending, and better control of state debt levels were important factors in the success.

    Common sense really.
    Shame the politicians in this country who decide our spending policy are incapable of realising this – but then their response to everything is “spend more”.
    The cabinet could do with taking a lesson from the white rabbit:
    “Don’t just do something, stand there!”

    • lifelogic
      Posted November 28, 2012 at 7:34 am | Permalink

      Exactly, an attitude much encouraged by “BBC think” infecting the nation and setting the national mood. Big government, higher taxes, fake green energy, over regulation of everything, ever more taxes and the idea that the government should “invest” and have a magic money tree from which to do so.

      • Jerry
        Posted November 28, 2012 at 9:46 am | Permalink

        @lifelogic: When all other logic fails, blame it on “BBC Think”. Clue, the BBC is not the government and never has been…

        • Disaffected
          Posted November 28, 2012 at 3:31 pm | Permalink

          No. but it is its voice. Time to make the BBC sink or swim on its own merits and by its own funding.

          • Jerry
            Posted November 29, 2012 at 10:14 am | Permalink

            The BBC is no more the voice of government than BSkyB is.

            As for making TV sink or swim on its own merits and by its own funding, indeed, there are far to many subscription channels that only survive because they are subsidised by being part of a package-deal that the viewer has no choice in funding, want one you have to take the other…

        • Posted November 28, 2012 at 5:38 pm | Permalink

          I agree the BBC is not the government. They do however infect the whole way that so much of the UK electorate think, politically and then vote. They even frame the whole way politicians debate many issues.

          People think for example there are currently savage government cuts thank to the BBC and that this is risking a double dip contrary to the clear facts.
          They also think governments can “invest” and create jobs. When in fact all the investment is pinched off the productive first and this actually destroys jobs.
          The BBC position is always one of envy, evermore taxation, more regulations, more government/levels of government, global warming scares and quack green energy.

          With the result that we currently have 3.05m underemployed people. About 1 in 10 of the 29m people actually in work.

          BBC think is so much of the UK’s problem.

          • Jerry
            Posted November 29, 2012 at 10:20 am | Permalink

            @Lifelogic: Are you really suggesting that either no one watches Sky News (or indeed ITN) or if they do these other broadcasters don’t also “infect the whole way that so much of the UK electorate think”?

          • Bazman
            Posted November 29, 2012 at 2:26 pm | Permalink

            We will have to get the government to stop spending any money with private companies then and see what happens to the economy. The idea that all the TV news channels are infecting the population is out of a dictatorship state. The country would economically and socially regress if your right wing fantasises were used. You just stop posting when confronted it has been noticed. What sort of ‘think’ is that?

      • Leslie Singleton
        Posted November 28, 2012 at 9:50 am | Permalink

        Lifelogic–You missed out your bit about the banks not lending, but then I saw you made your usual swipe lowed down so I came back. To me it’s useful to split the banks in to four, viz 1) Lending banks 2) Merchant (Sorry, Investment) banks) 3) Crippled banks partly Government owned and 4) Now the Green Bank. The ordinary lending banks (who know the difference between Funding and Credit, unlike the Government) very sensibly are going to lend less in the current environment–this is Lending for Dummies Chapter 1.01 2) Investment banks like to take big fees (who doesn’t?) but for doing nothing, certainly not as regards lending unless it’s somebody else’s money. The crippled banks cannot lend good money after bad because the Government hopes to sell them at not too big a loss and as for a Government “Green” bank, I have never read such rubbish in all my life. There may be other categories, but in any event, wherein cometh the extra lending you want? We would all like it of course but that’s not quite the same thing.

        • Posted November 28, 2012 at 6:00 pm | Permalink

          Regulators usually fix the last problem rather than the next one, the banks were geared too highly and making absurd and risky lending at the top of the market and now the regulators are forcing them to restrict lending to the private sector as exactly the time they need to be lending more.

          People, with very low risk projects and very good security, simply cannot get funding at sensible rates and terms. The result fewer jobs, more benefits and lower tax receipts. The government even owns some of the banks that are much of the cause of this negative cycle. RBS sucks money back from businesses and then the government pay out more in benefits to unemployed and get less tax revenue. It is the government shooting itself in the foot.

          They should cut expenditure on all the government nonsense and get the money lent sensibly to good SMEs and relax the gearing rules for sound banks and force the others to recapitalise or sell off.

          But they would rather set a minimum price for alcohol, force insurers to charge the wrong premiums (for floods and gender) and build pointless wind farms, PV arrays and mad high speed train tracks.

    • Timaction
      Posted November 28, 2012 at 8:38 am | Permalink

      So Canada discovered that less state is best. Most of us who lived in times when it was would agree. The State and Government gets in the way. Let the people decide what and how they want to spend their money, not Governments.

      • John Fitzgerald
        Posted November 28, 2012 at 10:15 am | Permalink

        All governments with a left leaning always believe that it is the responsiblity of the state to take most of a persons earnings in tax and then give a little back. Why? Because they firmly believe that we are not responsible enough to look after our own affairs and they know best!

        • Cliff. Wokingham
          Posted November 28, 2012 at 4:26 pm | Permalink

          Yes and hence the announcement today regarding alcohol pricing.
          We voted for a party called the Conservative Party to reduce the Labour “Nanny knows best” State we had under Messers Blair and Brown…….Now remind me John, is Mr Cameron a Conservative or just another politician that thinks he knows best and that we plebs should know our place? I doubt that I have had four pints of beer in the last year, but why should sensible, hard working people and I be punished because Nanny cannot be bothered to enforce existing laws in relation to the purchase and selling of alcohol?

          The more I listen to Mr Cameron and his cabinet, the more I feel the only change we really got at the last election, was a change in the suits that bossed us about and decided what was best for us, otherwise there was no change at all.

          • Posted November 30, 2012 at 8:57 pm | Permalink

            @Cliff. Wokingham
            Spot on just enforce the Laws that have been made.
            If you are Drunk and cause bother hefty fines, genuine costs for all the trouble and care you required because you were drunk.
            Same with the Banks and the Mis selling, It was fraud clear and simple, if a few responsible people who set up the scheme to enhance Bank profits. Had been jailed as an example to others in so called high paid responsible positions.
            It won’t happen, there are more thieves in suits then you will find in Jeans, trainers and hooded jackets.

        • lifelogic
          Posted November 28, 2012 at 9:15 pm | Permalink

          Also they like to get voted in and so they make their voters rather dependent on the crumbs they throw at them. State sector employees and people dependent on benefits so very often. They rather enjoy the power, that wasting so much of the tax revenue raised, gives them too.

    • oldtimer
      Posted November 28, 2012 at 9:26 am | Permalink

      FWIW the Econominc Freedom Index, which ranks countries on the basis of how goverment intervention can restrict the economic relations between individuals, puts Canada 6th with a score of 79.9. The UK is placed 14th at 74.1. Hong Kong (89.9) and Singapore (87.5) top the list followed by Australia, New Zealand and Switzerland. There is a clear message in there.

      • Adam5x5
        Posted November 28, 2012 at 2:55 pm | Permalink

        But will the government listen and leave us be?
        Or will they try to legislate and spend our money for us to buy our individual economic freedom?

      • lifelogic
        Posted November 28, 2012 at 8:54 pm | Permalink

        Indeed and the UK must surely be far worse that 14th by now, having been heading the wrong way since Major, Bliar, Brown and Cameron the soon to come Miliband. I see the “free” countries are perhaps about 50% richer in GDP per capita too and all outside the EU – quelle surprise!

      • lifelogic
        Posted November 28, 2012 at 9:26 pm | Permalink

        I see nearly all the EU countries are declining both in economic freedom and much else.
        http://www.heritage.org/index/ranking

    • Disaffected
      Posted November 28, 2012 at 9:38 am | Permalink

      It is reported today that a Tory MP has produced figures to suggest 16,000 people who declared an income of £1 million or more has reduced to 6,000 when the 50p income tax rate was introduced- presumably BBC employees who changed their status to corporate bodies to reduce their tax to 20%.

      I still do not understand why NI is not automatically added because it is a tax and taxpayers’ money was used by Labour politicians to con people with clever wording that it was for an improvement in the health service when it is a straight forward tax. So it is 62p income tax and 52 p income tax. How can it ever be fair for the state to get more of your income than you? Especially, as JR rightly points out, the Tory led Coalition waste so much.

      Millions of people have been drawn into the 52p income status by the coalition government. People in the 62p income bracket can afford to employ clever accountants (some MPs even charged the taxpayer to help them (get their tax bills right?ed)) to avoid this. The squeezed middle is being squeezed again by the Tory led coalition on income tax, fuel, energy, VAT, food, child benefit reductions and inflation. In contrast this year the Tory led coalition gave 5.2% pay rise to people who choose a life on welfare (not referring to the disabled or temporary people out of work). And Cameron expects us to believe he is for strivers!! He might have received a very good education and have a first class degree from Oxford in PPE, but he should not treat the rest of us plebs as stupid. he is anything but for strivers. Based on performance his game is spend and waste.

      • sm
        Posted November 29, 2012 at 9:53 pm | Permalink

        I would hazard a few million would like unemployment to be temporary.

        However i read a strand of thought which argues unemployment increases labour competition with short term being better than longterm unemployment. Well it looks like the short term is going long term.

        The unemployment benefit raise of 5% ,will be nothing as and when the full costs of this begin to impact.

        One needs to understand current out of work benefit rules make it unattractive to save, even if this was possible.

        This mess is a result of bankers and politicians playing fast and loose with the money supply – not the unemployed.

  2. Brian Taylor
    Posted November 28, 2012 at 6:50 am | Permalink

    This morning on Bloomberg is a report that Canada has removed the country from the Kyoto agreement and has cut it’s spending on global warming science by millions,until we pull back from the spending that has resulted from the 2008 Climate Change act,which has increased the price of electricity we in this country are stuffed!

    • Leslie Singleton
      Posted November 28, 2012 at 9:24 am | Permalink

      Brian–Wholeheartedly Seconded

    • Nicol Sinclair
      Posted November 28, 2012 at 2:02 pm | Permalink

      Brian: “we in this country are stuffed!”

      And HOW we are stuffed.

    • lifelogic
      Posted November 28, 2012 at 9:28 pm | Permalink

      Good for Canada, very sensible, but how with the UK compete under Cameron and fake green Libdems?

  3. David Jarman
    Posted November 28, 2012 at 7:09 am | Permalink

    Goldman Sachs is taking over the world!

  4. Gary
    Posted November 28, 2012 at 7:15 am | Permalink

    And probably most importantly ,Canada benefited from a huge commodities boom in the past 15 years. All the commodities countries did well. Britain mostly squandered her oil boom.

    • Posted November 30, 2012 at 9:17 pm | Permalink

      Was that not in the years of Mrs T, Sell off on the cheap of State assets, paid by and owned by Taxpayers not the Government.
      What happened to this and the North Sea Bonus?
      O yes, tax cuts to the Great and good.
      I remember base tax rates coming down from 30p to 27p being matched with a similar rise in National Insurance.
      Then again 3p NI had a limit, whereas 3p on tax did not.
      The threat to claw back assets from Private Company Pension Funds that had a surplus, leading to Companies cutting back their contributions so has to reduce these surpluses.
      When the Unions argued, that these Pension assets were deferred wages, it fell on deaf hears.
      Maastricht Treaty

      Annual government deficit:
      The ratio of the annual government deficit to gross domestic product (GDP) must not exceed 3% at the end of the preceding fiscal year. If not, it is at least required to reach a level close to 3%. Only exceptional and temporary excesses would be granted for exceptional cases.
      Government debt:
      The ratio of gross government debt to GDP must not exceed 60% at the end of the preceding fiscal year. Even if the target cannot be achieved due to the specific conditions, the ratio must have sufficiently diminished and must be approaching the reference value at a satisfactory pace.

      This was in 1992, which party was in charge?
      I could go on, I don’t know what the answer but it is not the people in charge. Just a thought, maybe if we do not balance the Nations books and start paying down the Nations debts, within say 5 years. Then all current MP’s should be sacked and barred from entering Politics again. Just pick at random 600 Local Councillors, regardless of party, to form the next National Government?

      Reply: Maastricht, 1992 and the ERM exit were all on John Major’s watch, not Mrs Thatcher’s.

  5. Pete the Bike
    Posted November 28, 2012 at 7:30 am | Permalink

    So we can look forward to big tax cuts when Carey takes over then? Fat chance.

    • Johnnydub
      Posted November 28, 2012 at 10:02 am | Permalink

      Pete… That’s George’s department… If you can persuade the fool to stop spending that it…

  6. lifelogic
    Posted November 28, 2012 at 7:58 am | Permalink

    Indeed all pretty obvious to anyone sensible, but no moves in this direction from Cameron or the coalition. Even the government’s welfare to jobs scheme is almost certainly a net job destroyer. Every time they tax industry and individuals too much they destroy jobs and growth. Every time they fail to get competitive and functional banking they do the same.

    Tax rates in Ontario, Canada can however rise as high as 49.53% (on worldwide income) however (combined federal and provincial tax rate, 2013 rate) and with much higher annual property taxes, and less pension tax relief – so even Canada is letting the state get out of control somewhat. The best things in the UK tax system are the Non Dom rules and the enterprise investment scheme not much else going for it.

    State sending should be about 20% of GDP for maximum good for maximum numbers nearly 50% as in the UK as absurd you are wasting 50% of the money on a small proportion of the population who do very little that is actually productive at all. Indeed much of it goes to pay them to do nothing.

  7. alan jutson
    Posted November 28, 2012 at 8:01 am | Permalink

    As many on this site and you have said many times before John.

    Lower government spending, stop the borrow and waste, and lower taxation to get a better balance, then things may start moving forwards.

    • lifelogic
      Posted November 28, 2012 at 9:17 am | Permalink

      Indeed, get Lord Patten to stop agreeing contracts at the BBC that pay out £450K, plus huge pensions and other benefits, just for a few days work at the BBC. This as a small start to trimming the state down to size. Then do something about all the countless people in the EU and government/quangos who earn vastly more than the PM perhaps. With gold pensions, these levels of remuneration are far, far too high. The state sector is simply killing the wealth creating sector it feeds off.

      • zorro
        Posted November 28, 2012 at 8:56 pm | Permalink

        Watch out lifelogic, Lord Patten will call you impertinent for questioning his activities. Oh and please don’t ask him what days he works or ask to see his diary…..

        zorro

        • Posted November 30, 2012 at 5:49 am | Permalink

          Lord Patten: phoney tough-guy act during the hand-over of Hong Kong was amusing. Result: sinecure as phoney euro-crat. Pathetic.

    • Jerry
      Posted November 28, 2012 at 10:03 am | Permalink

      Indeed but please remember that lower taxation is not just income tax, it is also indirect taxes, this could be lower fuel taxes for example and indeed this would likely help more people than any top rate income tax drop. Cutting, better still abolishing, the absurd ‘Green’ taxes [1] would also give our economy a boost too.

      [1] this doesn’t equate to giving a licence to pollute, just removing what has become nothing more than a method for governments to tax and spend

      • Posted November 30, 2012 at 5:51 am | Permalink

        And why would Cast Iron wish to lower the fuel tax on the filthy plebs?

  8. Crazed Weevil
    Posted November 28, 2012 at 8:34 am | Permalink

    You missed out the part where he set Canada’s interest rates at unsustainably low levels and creating the largest real estate bubble the country has ever seen. But don’t worry it’ll only explode like ours and the Americans did after he leaves Canada and starts work on our economy, that way nobody will notice.

    • A Different Simon
      Posted November 28, 2012 at 10:24 am | Permalink

      I always thought Tony Blair’s butterflying from one job to the next was due to a low boredom threshold .

      With Mr Carney it could be interpreted as naked ambition .

      As Michelle Shocked said , “The secret of a long life is knowing when it’s time to go” .

  9. Brian Tomkinson
    Posted November 28, 2012 at 8:50 am | Permalink

    JR: ” The UK Conservatives studied this in oppposition, but have not been able to do something similar in a Coalition government.”
    I don’t think they really tried, did they? I know you like to suggest that it is being in coalition that is the problem but that was your leader’s choice and he seems happy to contemplate a continuation after the next election. You showed us early on in this government that they planned to carry on spending but raise taxes and hope that growth would increase those revenues sufficiently to eliminate the deficit. Osborne misled us before the election when he said that he would reduce the deficit by 80% spending cuts and 20% tax increases. Apart from being mendacious he meant to target capital spending rather than the on-going current/revenue spending. They have wasted half their parliamentary time and in the process lost the confidence of many who trusted them to really get to grips with the parlous state of the country’s economy.

  10. Acorn
    Posted November 28, 2012 at 9:44 am | Permalink

    “So we need to ask what were the magic ingredients behind this success?”

    Well a couple of decades with gross fixed capital investment circa 23% may have had a bit to do with it. Unlike the UK at 14%. A Central Banker can’t fix that. You need political vision and inspiring leadership of a confident, ambitious population to do that.

    Please can we get back to obsessing about paedophiles and house prices, we have always been good at that; economics is getting boring.

  11. Posted November 28, 2012 at 9:47 am | Permalink

    This only happened since the right wing political parties stopped arguing amongst themselves and the got a prime minister who announced that his purpose in being in government was not to increase but reduce taxes.

  12. Majorfrustration
    Posted November 28, 2012 at 10:55 am | Permalink

    Well lets all hope they do get the message as its not rocket science. However after two years or so in office I am not going to hold my breath.

  13. Neil Craig
    Posted November 28, 2012 at 11:32 am | Permalink

    Canada has also had the advantage of the shale & tar sands so it has no energy problems. Despite the almost desperate newfound enthusiasm for him across the political class he cannot do magic and we cannot get out of recession so long as our government is making energy scarcer and more expensive.

  14. David John Wilson
    Posted November 28, 2012 at 11:41 am | Permalink

    However we also need to consider the huge detremental effects on the environment and world climate of the extraction of oil in the tar fields. The UK does not have huge areas of almost waste land that can be devoted to cheap energy production. Neither do we have an huge economic powerhouse as a neighbour that is keen to finance major projects. My experience in Alberta for example shows the major problem often to be avoiding the competition of finance from the US rather than seeking it.

  15. Simon
    Posted November 28, 2012 at 12:45 pm | Permalink

    Ah, so what you’re saying is that Canada was a good Keynesian, and reduced government spending during a boom, rather than during a bust as the coalition is trying to do.

    Definitely a lesson for us there.

    • A Different Simon
      Posted November 28, 2012 at 3:02 pm | Permalink

      If I was a financier who had through financial engineering pulled money out of the economy on the way up , I would , realising that the money is backed by nothing much want to convert it into real assets .

      What better way to do this than to impose a cold turkey style credit squeeze which will force liquidation of assets and bring down asset prices ?

      The last governments policy of expanding all forms of credit during a boom rather took away this Government’s ability to carry out counter cyclical spending without massive borrowing .

      I suspect Keynes would be dismayed at what is proposed in his name and Adam Smith disgusted by the institute which misappropriates his name .

    • zorro
      Posted November 28, 2012 at 9:04 pm | Permalink

      They’ve kept spending down to acceptable limits during a downturn as well. They also restructured when they had problems during the 1990s and cut spending to trim their government machine.

      zorro

  16. Posted November 28, 2012 at 12:55 pm | Permalink

    Fracking the major tar sands for oil has helped just a little. Also they did not have the curious people we have had on London urging our government onto ever more barmy schemes.

  17. Mark
    Posted November 28, 2012 at 1:15 pm | Permalink

    You may be interested in the following comparison of data from HMRC Table 2.5 on the numbers of taxpayers in different income brackets. First a version produced last year

    £0.5m+ £1m+ Taxpayers ‘000 Tax paid £bn
    2007-8 28 14 £18.1
    2008-9 28 14 £18.1
    2009-10 28 14 £17.6
    2010-11 26 13 £20.1
    2011-12 29 14 £22.7

    Footnote:

    Projected estimates based upon the 2007-08 Survey of Personal Incomes using economic assumptions consistent with the OBR’s March 2011 economic and fiscal outlook. These projections fall outside the scope of National Statistics.

    And the most recent one:

    £0.5m+ £1m+ Taxpayers ‘000 Tax paid £bn
    2009-10 31 16 £20.8
    2010-11 19 6 £11.8
    2011-12 24 10 £15.7
    2012-13 23 8 £14.8

    Footnote:

    Projected estimates based upon the 2009-10 Survey of Personal Incomes using
    economic assumptions consistent with the OBR’s March 2012 economic and fiscal
    outlook. These projections fall outside the scope of National Statistics.

    There are none so blind as cannot see.

    • Edward
      Posted November 28, 2012 at 4:49 pm | Permalink

      Indeed Mark your figures show that lower tax percentage rates are not the “hand outs for the rich” as the left like to shout.
      Tax rates need to be set carefully in to optimise revenues. Then if this is done properly the rich pay more.

      And a smaller state, as Canada has proved, does not automatically mean “an attack on the poor” as the left like to shout, whenever cuts are attempted.
      A more efficient, less wasteful Government can result in more funds being available to help the less well off.

  18. Conrad Jones (Cheam)
    Posted November 28, 2012 at 1:17 pm | Permalink

    Adair Turner would have been a better choice.

    • Jerry
      Posted November 28, 2012 at 4:06 pm | Permalink

      Cough….

      I sincerely hope you were attempting to be ironic!

      • Conrad Jones (Cheam)
        Posted November 29, 2012 at 11:11 am | Permalink

        Hi Jerry,

        I wasn’t trying to be ironic – this is what Adair Turner said at the South african Reserve Bank on 2 Nov 2012:

        “The financial crisis of 2007/08 occurred because we failed to constrain the private financial system’s creation of private credit and money.”

        He also said:

        “Banks which can create credit and money to finance asset price booms are thus inherently dangerous institutions.“

        To me, this indicates that Adair Turner fully understands the problems and knows how to articulate them to a potentially hostile audience.

        If you’ve ever heard Mark Carney speak, he sounds like an Investment Banker trying to get you to part with your life savings through Financial doublespeak.

        This was yet another opportunity for the Government to make the right decision and yet again, they’ve blown it. Not only did they not pick the right man for the Job, they picked one of the worst men for the Job.

        There will be more QE, more alignment with Europe and more Financial Crisis quickly followed by more Centralist Control from the IMF, World Bank, FSB and the ECB.

        The City of London will be protected – “whatever it takes”, while the real Economy will be drained of yet more l wealth.

        I think we will need Irony and Humour as an anesthetic to dull the pain of what is to come.

        I suppose it is Ironic that the key role of the Bank of England is Monetary Stability and Low Inflation when we have Low Interest Rates inorder to stimulate Higher Inflation. Mark Carney has said that the biggest problem is Deflation – which led Alan Greenspan to create the biggest Asset Bubble in History.

        • Lindsay McDougall
          Posted November 29, 2012 at 2:23 pm | Permalink

          It was effectively the Bank of England (and Gordon Brown) that financed the crazy housing boom of 2001-2007 by failing to use an inflation index that included house prices. Had it done so, monetary policy would have been tighter.

          Adair Turner. Is he the same as the Lord Turner that wanted to join the Euro, got the FSA to force ‘independent financial advisors’ to recommend retirement annuities (one of the very WORST investments that someone can make) and wants the Bank of England to bankrupt itself by writing the QE amounts off permanently?

          • Conrad Jones (Cheam)
            Posted December 4, 2012 at 2:51 pm | Permalink

            Mark Carney is a Globalist – he’s chairman of the FSB.

            He’s stated that more “Centralisation” in the Financial system is required. That means someone from the IMF, World Bank, Zurich or FSB telling us what we can and cannot do.

            Adair Turner now realises the mistake suggesting we join the EURO, and is now glad we didn’t. Mark Carney doesn’t think the EURO is a mistake. He thinks that we should increase Centralisation into Global Financial Control and More Centralised Political Control.

            Ten years ago, many people thought the EURO was more stable than the Pound because they thought it was more like the US dollar, even Saddam Hussein thought it was better than the Dollar.

            Now we all realise that FIAT Currencies are completely worthless – especially the ones controlled by more than one country.

            (removed personal abuse fo Carney)Is Mario Draghi helping the EURO ? Answer that question honestly and it will seem obvious that Mark Carney is a classic mistake.

            reply: The government and Parliament decide on Euro membership, not Mr Carney. The Conservative party is against UK membership in pricniple and in practice. Labour and Lib Dems welcome the idea in principle but do not favour membership at the moment.

          • Conrad Jones (Cheam)
            Posted December 4, 2012 at 10:51 pm | Permalink

            The Government really needs to stabilise the Pound Sterling.

            If our currency weakens any more (through increased inflation), it makes it more likely that a EURO style currency would be proposed as a solution – although the ECB does not seem in any position to argue that case, stranger things have happened.

            One way of doing this is to alter the ratio of debt based Banks Deposits to Government Created Money to 80% to 20%, from the current 97% to 3%.

            The injection of Government Money into the Economy would inspire confidence in the Private Sector and increase peoples willingness to spend.

            The reduction in the ability for Private Banks to create money would naturally stabilise the Economy. Restrictions on Mortgage Loans based on rentable value would have to be put in place, or a complete removal of Deposit Insurance provided by the Government.

            The illusion of wealth protection through deposit insurance and bank bailouts still results in loss of purchasing power as the Economy does not function correctly in its present framework.

            It would be possible to lose ones money, but that knowledge would make us weary of where wee put that money and would also encourage us to spread that money amongst several Banks and Building Societies. Many people are doing this anyway.

            A full reserve system would make banks liable for the full amount deposited as this type of account would be “Allocated” to the depositor, making the Bank a custodian. Investment Accounts would be at the Risk of both the Bank and the Investor, but would generate returns to reflect that risk.

            The UK must rethink how it’s Financial System works or the whole of the Country will be taken over by Foreign Interests, just like the Countries in the EURO Zone.

            If we think the Pound is worth keeping, we better start fixing it now.

            I expect we will just end up using Gold, Silver or BitCoin.
            Perhaps a New Pound based on Silver. They say History Repeats itself.

        • Jerry
          Posted November 29, 2012 at 3:03 pm | Permalink

          Conrad, this is the same Adair Turner who headed the UK FSA from 2009, who has not felt the need to apologise for the actions of the FSA -either for actions taken before or after he was appointed- and has some ideas on tax (via a “Tobin tax”) that appear to be very “World Government” in nature?…

          • Conrad Jones (Cheam)
            Posted December 4, 2012 at 9:52 pm | Permalink

            I think the UK Government should instigate it’s own “Tobin Tax”.

            My personal opinion is that Taxing Financial Derivatives Markets, CDSs, and MBSs is more akin to Taxing Burglary, Auto Theft and Street Muggings.

            It’s not Taxation the city needs, it’s complete reform and merger into the whole of London.

            You are absolutely right – we should be able to get our own Politicians to set our own Laws for our benefit. We don’t want Britain to resemble Greece, Italy, spain or Portugal.

            It is rather perfectic that our Government (Labour and Conservative) finds it quite easy to muscle in to Iraq, Afghanistan, Libya and possibly Syria and Iran, but trembles at the knees in awe of the Lobbying power of the City of London.

            The Conservatives are supposed to be the Party of “Sound Money” – I have seen little evidence of that as Inflation is still reducing our salaries purchasing power and our parents life savings, with rediculously small Interest rates.

            Don’t forget that the John Major was the one who signed the Maastricht Treaty (with some get-out clauses admittedly), but crucial aspects were left in relating to who creates our Currency. I suspect that Private Banking Interests wrote the Maastricht treaty as the amount of Notes and Coins now in circulation is only 3% as opposed to about 12% at the time of signing.

          • Conrad Jones (Cheam)
            Posted December 5, 2012 at 12:27 pm | Permalink

            I agree, a Tax imposed on us from Europe is always a bad thing. No doubt, the revenues from that tax would be sent to Europe where it would be lost forever.

            But the idea of a Tax on financial transactions should be implemented by our own Government. We pay 20% VAT on Goods and Services. That is a Fifth of the cost of those goods and services added on top. Yet the Financial Services Industry want to pay NOTHING.

            With High Frequency Trading – a dubious practice in my opinion; a Tax would either bring in additional tax revenue or help slow down this practice as it appears that it’s only purpose is to manipulate markets and reduce genuine Price Discovery.

            The City of London is against a Tobin Tax whover implements it, that does not mean that it is wrong.

        • Mark
          Posted November 29, 2012 at 11:09 pm | Permalink

          Adair Turner failed as the boss of the FSA to ensure proper regulation. He shows little sign of understanding how banking actually works. He also supports joining the Euro. You’d have him for Governor?

          • Conrad Jones (Cheam)
            Posted December 4, 2012 at 1:19 am | Permalink

            Adair Turner does understand how Banks work and he understands how the Crisis materialised. There appears to be a great deal of desperate acts by Banks, in order to prop up the current unsustainable Banking System. These could be percieved as Fraud. The mis-selling of Investment Plans, Liar Loans, Interest only mortgages, derivatives, credit Default swaps, Mortgage Backed Securities and alike have infected a once stable Banking System.

            The EURO:
            Yes – he did propose to join the EURO, and now admits it was a big mistake:
            Adair Turner: “I feel if you’ve made a mistake you should challenge yourself to why you’ve made the mistake. We all make mistakes, the issue is to learn from them.”

            In contrast Gordon Brown sold our Gold for peanuts and still won’t admit he was wrong.

            I still feel that Adair Turner would make a far better Governor than Mark Carney. I do not trust an ex Goldman Sachs emlpoyee who has done nothing to prevent a Housing Bubble in Canada. Europe is full of ex Goldman men causing havoc in the EURO Zone, and they do not admit mistakes and they do not state that there’s anything wrong with solving debt with more debt.

            From the Independent:

            “The Independent on Sunday understands that the former SFO director, Richard Alderman, came under pressure from the Treasury, the Ministry of Justice and the FSA last September to take the lead in the Libor inquiry last September. But he resisted, blaming financial restrictions imposed by the Treasury and a heavy existing workload. The decision effectively left the FSA as the only UK body investigating the Libor allegations, resulting in last week’s record-breaking £290m fine.”
            http://www.independent.co.uk/news/uk/politics/budget-cuts-killed-off-libor-inquiry-7901940.html

            The Serious Fraud Office’s budget fell 26 per cent since the 2008-9 fiscal year to £39.5m in 2010-11 and it is due to drop another 25 per cent to £30.5m by 2014-15.

            It’s not just about Banks it’s about how committed the Government is and the general public concerning understanding the current Banking System and then regulating it, to prevent another crisis.

            In our current system, the only way we can get out of a recession is by taking on more debt. In which case, we have to seriously look at how we can change the current system, especially as the Government wants to cut funding of the institutions (such as the SFO and FSA) who regulate it.

            The City of London Corporation is the most powerful “Local Authority” in the Land. It has 9,000 residents – who each have a vote in their local elections, but; the Corporations who are also resident there have 32,000 votes. Few seats are contested. Of the 32,000 votes cast by the Local Businesses, none of them take into account the wishes of the Employees of those companies, they are cast by a few men at Board Level.

            Of the three major Corporations accused of Tax Avoidance, there was no mention of how or where they got assistance in Avoiding Tax. Tax Havens – like the City of London and it’s satellites (Jersey, Guernsey, Caymans etc) is the infrastructure by which large Corporations and Individuals can avoid tax. Companies in the City exist for this reason, yet presenters such as John Humphries avoid talking about it.

  19. Conrad Jones (Cheam)
    Posted November 28, 2012 at 1:20 pm | Permalink

    Seeing as you are such a big Fan of Canada, will you now support Canadian style Gun Laws in the UK ?

    • Posted November 30, 2012 at 5:55 am | Permalink

      That’s been decided: plebs in the UK cannot be trusted with guns. And the gutless wonders went along. “FROM MY COLD, DEAD HANDS!”

      • Conrad Jones (Cheam)
        Posted December 4, 2012 at 11:13 pm | Permalink

        Exactly. “Plebs” in the UK cannot even be trusted to own a realistically coloured plastic BB Gun, let alone a Firearm.

        Ironically our Government encourages Middle Eastern Dictators to buy our UK Manufactured; Fighter Jets, Machine Guns and Missiles – that’s perfectly fine of course.

        Tony Blair was still around shaking hands with Gadaffi
        (argues UK sold weapons to Libya, and suggests sometimesw weapons are sent out with misdecriptions of the cargo – there is meant to be a proper system of permits and checks on arms exports)

  20. Conrad Jones (Cheam)
    Posted November 28, 2012 at 1:28 pm | Permalink

    “The Central Bank of Canada did make enough liquidity available to banks at a time when the Bank of England was preaching moral hazard and watching banks go bust as a result. Today Canada has an official interest rate of 1%, and an inflation rate below the 2% target. It was also the state of the Canadian public accounts. that helped Canada through the Credit Crunch.”

    Are you the same John Redwood who said that you were never in favour of Bank Bailouts ? You seem to have changed your tune. now – apparently; you believe that the Bank of England didn’t bail out the Banks fast enough. Which is it ?

    Which measure of Inflation Rate do you think they are using – the CPI? The CPI doesn’t take into account true Food Price and Energy Price Increases. House Price Inflation is also not taken into account making your statement wholely naive and gullible. If your statement isn’t naive and gullible you certainly must think the people on this blog are.

    Reply What nonsense. I do not support bail – outs – subsidies or the purchase of taxpayer shares. I have always suported the provision of short term loans against collateral at market rates to solvent banks, and argued for these at the time of the taxpayer bungs.

    • zorro
      Posted November 28, 2012 at 9:09 pm | Permalink

      There is a difference between supplying liquidity (with sufficient guarantees) as a lender of last resort to banks starved of access to funds on the market because of prevailing conditions and bailing out (continually) basket cases who are no longer viable as businesses.

      zorro

  21. Conrad Jones (Cheam)
    Posted November 28, 2012 at 1:49 pm | Permalink

    You keep talking about reducing Public Spending but you ignore the amount of spending on the Military.

    You also ignore the drain on Society that the Financial System creates. After factors, apart from implicit Deposit Insurance, bailouts and QE ARE Only 8% of Bank Lending goes into productive investment.

    (removed attack on Goldmans)
    I agree that costs such as Housing Benefits should be cut – dramatically, but the UK Drone Aircraft are costing the UK taxpayer £2 billion.

    Do you honestly think that having 92% of Bank Lending Money going into speculative Asset Bubbles is somehow good for the UK Economy ? Where did you study Economics – at Goldman Sachs ?

    Do you think that spending more money on Military Hardware rather than Education and positive Productive infrastructure is going to provide a stable future?

    Do you think that Canada’s allegeded successes are down to one ex-Goldman Sachs employee? Adair Turner should have got the job of Governor.

    • sm
      Posted December 2, 2012 at 1:14 am | Permalink

      Anyone interested in reading about debt free bradbury treasury notes? Seem like they were useful in the past.

      • Conrad Jones (Cheam)
        Posted December 4, 2012 at 1:32 am | Permalink

        Interesting, proves that the Treasury can create Debt Free Money when it wants to. Our version of Greenbacks perhaps.

        No reason why the Treasury should not create it’s own Notes again, although the Bank of England has proved that it is very careful not to create too many – maybe too careful, while allowing Banks to create as much debt money as they like.

        The Bank of England Notes are just as Good – there just isn’t enough of them in relation to Bank Created Credit Money (Bank Deposits).

        • sm
          Posted December 7, 2012 at 12:24 pm | Permalink

          Indeed – the reasons why they (bradbury treasury notes) debt free money was withdrawn needs much more attention.

          It would seem it was clearly in the interests of the finance industry which succeeded in persuading our law making politicians (who sometimes have the public interest at heart).

          • Conrad Jones (Cheam)
            Posted December 10, 2012 at 12:45 pm | Permalink

            sm,

            I hadn’t heard about “Bradbury Treasury Notes” until you mentioned them, so thank you for that.

            “These ‘Bradbury’ Treasury Notes Solved the 1914 Run on The Bank of England and remained in circulation until 1928 without adding 1 penny to the National Debt. ”

            It’s unclear if these were backed by Gold, whether the Bank of England (which was a Private Central Bank in 1914) charged interest on Banknotes it produced, and why the became no longer legal tender in 1933?

            It seems that the Banking Industry allows money to be created out of thin air when it is being bailed out or when it produces loans. It does not seem to allow it for legitimate Public Spending, which is why the Lobbying Machine of the City of London has somehow “converted” a Private Investment Crisis into a issue of Public Spending.

            2008 Crisis started as an issue with Private Investment Banks buying fraudualant debt securities linked to Sub Prime Mortages in the United States. The Public then rushed to the rescue – thanks to Gordon Brown and Hank Paulson, with public funding to protect the Private Banks from collapsing. It’s now portrayed as a Public Debt Issue, Government’s overspending. Basically, the Financial Lobbyists are doing a pretty good job of convincing us that their irresponsible and poorly regulated and rated investments which blew up in their faces is nothing to do with them, it’s our fault because we spending to much on local authorities. It’s now portrayed as overspending on Schools, Hospitals and Pensions for public sector workers. Never a mention of programs like the £2 billion spent on a UK Drone Aircraft project.

            Gordon Brown didn’t even consider a solution to the Northern Rock “run on the bank” as Treasury Created Banknotes. If our debt is so bad, Bradury Style Notes would solve the issue over night.

          • Conrad Jones (Cheam)
            Posted December 10, 2012 at 12:50 pm | Permalink

            It’s also sad to note that the other time the government will authorise debt free money is in time of War – just like Abraham Lincoln.

            If it works in time of War, why not in time of Peace?

  22. Conrad Jones (Cheam)
    Posted November 28, 2012 at 1:54 pm | Permalink

    The Canadian Banking System is more strongly regulated than the UK Banking System, they have more resources – Canada is a DIFFERENT Country.

    Mark Carney did not ride to the rescue of Canada on his White Stallion. If he did, the Canadians wouldn’t want to dump him on us.

    You seem to think that the Central Bank is in control of the Economy – if that is the Case – why is the Governor unelected?

    We can elect our local Police Commissioners but not the most powerful financier in the Country – perhaps in Europe.

    What’s that say about our democracy?

  23. Nicol Sinclair
    Posted November 28, 2012 at 1:59 pm | Permalink

    “The UK Conservatives studied this in oppposition, but have not been able to do something similar in a Coalition government.”

    Why the hell not? What’s up with our financial leaders?

  24. Barbara Stevens
    Posted November 28, 2012 at 2:00 pm | Permalink

    On paper Canada looks healthy compared to the UK. However, we have a welfare state system here, which they don’t have. That takes a great proportion of money when you have mass unemployment. Our problem is no jobs, and none being created enough within the private sector to compensate for the jobs being lost in the public sector. Yes, we’ve made some progress, but there are at least 20 people chasing one job, if not more. I’ve heard via a political programme Canada’s economy is not so healthy has it was and this man may have jumped ship before the news hits the fan. We’ll have to wait and see on that one, however, if he’s as good as they say he is then he’s welcome. We in the UK have a different set up on how a countries run than in Canada, and the latter is much larger with lower than average population per square mile than the UK. We are over populated, but we still allow immigration to continue unabated. We need provison of houses, health care, welfare, jobs, schools, not to mention the extra policing for crime many of these immigrants bring.You cannot keep letting people in and not have the expense of keeping them and providing for them and their families. The only way we can help ourselves is stopping immigration for at least five years, time to get out house in order. This man will be no miracle worker, and no doubt he will know how to proceed, but he will need help from government in areas listed above for his plans to work effectively. I won’t hold my breath.

    • Graham
      Posted November 28, 2012 at 4:22 pm | Permalink

      Agreed.

      That’s why we hear talk of taking 33% more rural land to build houses on – mainly for displacement caused by immigration.

      The amazing lack of joined up thinking is unbelievable which only leads one to assume that the flooding of the country is deliberate and a continuation of the previous regime.

      I fear it will not end well.

    • Keith Willey
      Posted November 28, 2012 at 5:50 pm | Permalink

      Canada absolutley has a welfare system. The federal department, HRSDC delivers employment insurance (i.e. unemployment benefit) amongst other welfare supports.

    • zorro
      Posted November 28, 2012 at 9:14 pm | Permalink

      We have unique economic and social problems linked to our small land mass and continual mass immigration adding financial pressures of all sorts. Canada as others have said is a different country in many ways. I think that they do have a bit of a housing bubble which looks particularly vulnerable to a downturn which they have not yet really endured in the last few years.

      zorro

    • Conrad Jones (Cheam)
      Posted November 29, 2012 at 1:48 pm | Permalink

      Barbara,

      You may be interested in this:

      “Between 1995 and 2007 the UK population increased by 5%, the housing stock increased by 10% and house prices increased by 350%, meanwhile mortgage lending by banks increased by 630%. Which of these figures is more likely to have led to a 350% rise in house prices: a 5% rise in population growth which is matched by an increase in supply of housing; or an unprecedented increase in mortgage lending from the banks?”

      From the “Independent” – Article: “Why Exactly Is it So Expensive for us to Own a Home?”

      Or:

      From the Bank of England –
      “Financial Stability Report November 2012 | Issue No. 32″ page 33
      http://www.bankofengland.co.uk/publications/Documents/fsr/2012/fsrfull1211.pdf

      “…for example in property markets…
      Surveys of global fund managers indicate that their portfolios
      are currently most overweight, relative to their typical pattern,
      in real estate assets. In several EMEs, rapid credit growth in
      recent years has already been associated with high property
      price inflation”

      It is a Myth that there is a physical shortage of Houses in the UK. It is also a Myth that there is a shortage of Housing in Canada – the reason why House Prices are high is directly due to Government Policy (CHMC Insurance) and Excessive Credit Expansion by Canadian Banks.

      The point you make cnocerning “No Jobs” is very important. The Reason why there are not enough Jobs is because that 92% of Bank Lending goes into speculative ‘Asset Bubble’ Investment, while only 8% goes into Productive Enterprise.

      In 1963, Government created Money (Notes & Coins) was 20% of the total money supply, now it’s 3%.
      That means that in order for me or you to pay our debts, someone else has to be in debt – we no longer have that 20% buffer zone that we had fifty years ago.

      It is strange to think that Government’s still store Gold at the Federal Reserve Bank in New York, despite there being no practical reason for it. They still act as if there is a Gold Standard.

    • Conrad Jones (Cheam)
      Posted November 29, 2012 at 2:12 pm | Permalink

      Canada does not call it a “Welfare System” they call it “Social Programs”

      http://en.wikipedia.org/wiki/Social_programs_in_Canada

      Private Healthcare Insurance is banned for certain treatments to prevent a two tier system.

      “All provinces in Canada provide universal, publicly funded healthcare”.

      Private Education is less popular in Canada as Canadian seem to prefer the State controlled Schools.

      They have State or Federal Taxes and Provincial Taxes like PST, Government Taxes like GST. They pay income tax, but not as much as we might believe.

      “http://www.investopedia.com/financial-edge/0411/do-canadians-really-pay-more-taxes-than-americans.aspx#axzz2DcW63mbj”

      “Federal Income Taxes
      U.S. federal income tax brackets range from 10% to 35% for individuals. On the Canadian side, the range is 15% to 29%. In the U.S., the lowest tax bracket bumps to 15% at $8,500 and to 25% at $34,501. The bottom Canadian bracket stays at 15% until $41,544. This is the bulk of the reason that lower-income Canadians are often better off than Americans in an identical tax situation. On the other hand, the IRS taxes the richest Americans at 35% whereas the top federal tax rate in Canada is 29%. Rich Americans, however, have access to many tax deductions that Canada’s Alternative Minimum Tax does not allow.”

      Canadians usually pride themselves on the fact that they are NOT Americans.

      Their Radio Stations sometimes make fun of their “Gun Crazy” neighbours to the South despite having as many Guns (per capita) as their American Cousins.

      Many Americans can’t afford Healthcare – but American Government Military Spending equals the rest of the World’s put together.

  25. Conrad Jones (Cheam)
    Posted November 28, 2012 at 2:05 pm | Permalink

    ” The Central Bank of Canada did make enough liquidity available to banks at a time when the Bank of England was preaching moral hazard and watching banks go bust as a result. Today Canada has an official interest rate of 1%, and an inflation rate below the 2% target. It was also the state of the Canadian public accounts. that helped Canada through the Credit Crunch.”

    The fact that you say that Banks shouldn’t be allowed to go bust speaks volumes.

    People have called you Right Wing – but you aren’t -are you? You are a Corporate Socialist who believes that Public Spending should be cut and Zombie Banks should be bailed out, but you never explain why because that would lead you into a discussion about how flawed our monetary system is, and that’s somewhere you are afraid to go becasue it would go against the Interests of your Banking Friends.

    I am very disappointed in you Mr Redwood. I thought you cared about your public supporters more than your Corporate ones.

    Shame on you.

    I pray for the day when a Politician thinks more about the people who elect them than the Business Interests who fund their campaigns.

    So you DO support Bank bailouts – without condition.

    Reply What n onsense. It is the job of a Central Bank to make liquidity available on market unsubsidised terms, not to subsidise or buy stakes in commercial banks.

    • Conrad Jones (Cheam)
      Posted November 28, 2012 at 9:16 pm | Permalink

      Thank you for your reply.

      I draw your attention to page 10 of the Bank of England Report:
      ” Financial Stability Paper No. 15 – May 2012
      The implicit subsidy of banks”
      http://www.bankofengland.co.uk/publications/Documents/fsr/fs_paper15.pdf

      Notice Chart 5 in the Notes:
      “Aggregate implicit subsidy of Barclays, HSBC, Lloyds Banking Group and Royal Bank of Scotland”.

      The general public were dismayed to hear that Northern Rock and RBS were “bailed out”, and it is true to say that you have indeed criticised these bail outs, but also; like many others; understand that not to have bailed them out in our system of 97% Debt based money, would have caused a far more severe collpase in our entire monetary system.

      What was not explained in the main stream media, are the subsies and priveleges bestowed upon the likes of Barclays and HSBC who repay the tax payers generosity by having offshore Companies and Nominee Companies for the prime purpose of avoiding tax payments.

      Central Banks main purpose may be intended to make liquidity – in a Private Banks Reserve Account; but the rest of us are reliant on the Private Making the decisions on where it’s Loans are directed. 92% of these loans are thrown at speculative investments, only 8% go into productive enterprise.

      It is easier to get a £10,000 loan to decorate one’s house than it is for a small business to invest in new machinery that will create jobs. Until we fix this problem, cutting Public Spending will only make things worse. Unless that Public Spending is related to unecessary weapons which will increase the number of enemies we have around the World.

      If public spending is invested in renewable energies, Higher Education and productive enterprise, instead of Weapons or other schemes which help Drive up House Prices like Housing Subsidies, housing tax breaks and Benefits, then we have a brighter future.

      But seeing William Hague continually go on about Assad in Syria while turing a blind eye to Bahrain and the Civilian Deaths in Pakistan as a result of American Drone Aircraft strikes is incomprehensible to me. I’m sorry, but I don’t get it.

      Perhaps you understand why it is necessary to kill civilians (even by accident) in Pakistan – but I’m afraid I do not. It is also alarming that we are spending £2 billion on our own UK Drone program. Why not cut that budget?

      War is by far the most expensive cost a Nation has to endure, and yet we seem very willing to provoke more of these Wars. Libya was a brutal destruction of a Sovereign Nation that we participated in.

      I hope you do not feel that this is nonsense too.

      • zorro
        Posted November 29, 2012 at 9:01 pm | Permalink

        All very fair comment, particularly the foreign adventurism and lack of investment in productive capacity and too much subsidy to the collective housing affliction we seem to suffer.

        zorro

    • zorro
      Posted November 28, 2012 at 9:17 pm | Permalink

      CJ, I really don’t think that John has ever said that he supports bank bailouts without condition. What’s got your dander up today?

      zorro

      • Conrad Jones (Cheam)
        Posted November 29, 2012 at 10:41 am | Permalink

        Hi Zorro,

        Thanks for your comment.

        I am concerned that this quick announcement of an ex Goldman Sachs man in the Top Job at the Bank of England is a signal that the Government is going to continue to deregulate the Banking Sector and is going to continue to protect Banks Interests over the Public’s Interests.

        The record of other Goldnan Sachs people in europe (like Mario Draghi) has been disasterous – where they have consistently helped bail out Banks and implement Austerity Measures. Both Greece and Italy have had unlected Goldman Sachs men installed to the dtriment of the people there. They are against any form of Reforming the Monetary System as they personally benefit from the increased amounts of debt based money in the system over the past 40 to 50 years.

        It is wrong for me to just criticise the decision to appoint Mark Carney without suggestng an alternative. My preferred choice would have been Adair Turner. Mervyn King was making the right noises and it is a shame that he is now going. I fear that Mark Carney is a Globalist as he has said in a HARDtalk interview that Europe needs a more cetnral regulatory regime. By mplication, this regime would also extend to the UK.

        Mark Carney is regarded as an Alan Greenspan style guru – a vaneer of success that hides the fact that a Housing Bubble in Canada is putting tax payers money at severe risk while increasing the amount of private debt. If this Bubble were to burst, the tax payer is tied ‘hands and feet’ to providing Mortgage Lenders payments on defaulted loans. It is the classic Moral Hazzard situation, the one that led to 2008 in the US.

        Low Interest rates and cheap money dumped into Private Bank Reserve Accounts is not the answer to our Financial System problems. It is merely extending the time before it implodes and takes us with it.

        Mark Carney is also closely linked with Mario Draghi on the Financial Stability Board.
        http://www.financialstabilityboard.org/about/plenary.pdf

        It has been suggested that there could be a conflict of interests.

        Reply: Mr Turner was advocating cancelling the £375bn of UK debt.

        • Conrad Jones (Cheam)
          Posted November 29, 2012 at 10:47 am | Permalink

          Mark Carney succeeded Mario Draghi as Chairman of the FSB.

          Europe is not exactly a success story.

        • Conrad Jones (Cheam)
          Posted November 29, 2012 at 4:32 pm | Permalink

          That’s true, and you have said on this subject that there would not be a problem with the balance sheet of the Bank:

          “Fortunately, Mr Peston, the Bank has bought the gilts on the back of a Treasury loan, with an idemnity from the Treasury. The Bank and the Treasury could agree to cancel the gilts (Bank assets) and cancel the Tresury loan (Bank liability), leaving the Bank’s balance sheet unscathed by the activity. The Bank would owe the Treasury the profits on the gilts it has bought, which indemnity could also be cancelled leaving the Bank all square. ”

          You also said:

          “And should they? That is altogether a more difficult question. It would be good, at a stroke, to cut the size of the official (gilt edged) debt by almost 40%, and cut the interest burden. It would be bad to let the markets think that the UK now just intended to print as much money as it felt like spending in the public sector over and above tax revenues. ”

          You put your argument well but you did not mention that the MPC is allegedly in control of Inflation, where as; we all know on this site that the Private Banks are the ones going basurk on printing Money – £1 Trillion in just seven years, not the treasury or the Bank of England. QE Money went into the Reserve Accounts of Banks, not into the Economy. It is the Private Banks that flood the Economy with Money.

          It is up to people like you – the Professional Politician; to explain the Financial Benefits and Stabilities of a solution that would benefit the Tax Payer. If anything, it would relief the tension over what the UK bond MARKET is going to do. Yields are already at an all time LOW.

          Lord Turners plan would not be like Zimbabwe the debt cancellation would not affect the main Money supply. It would not create Hyperinflation. Weimer Republic was caused by printing massive amounts of Bank notes and spending them into the Economy. Lord Turners Plan – as you explain in your banace sheet view of the transaction, is totally different. It is the Private Banks that are in Trouble, not the Government. Germany was in massive debt, and forced to pay war reparations after WW1.

          At present the Bank of england is holding Debt to itself. The Bank of england is not like you or me, it has the Power of the State to Create Money, BUT EVEN IF IT DIDN’T, I’ll repeat myself, the BoE is holding it’s own debt. Therefore £375 billlion of UK Debt can be removed, and the savings in Interest Payments can be used to improve the Economy.

          You again avoid the problem created by too much Private Bank created credit Money. Here’s yet another opportunity to help improve that problem. Handed to us on a silver plate.

          You helped me understand that it would work on the balance sheet. Thank you.

          • Conrad Jones (Cheam)
            Posted November 29, 2012 at 4:40 pm | Permalink

            The Lord Turner Plan again:

            “It would be bad to let the markets think that the UK now just intended to print as much money as it felt like spending in the public sector over and above tax revenues.”

            I don’t agree with your point.

            This money was NOT created for the public sector, nor was it spent into the public sector. This is the QE Money created for Private Banks Reserve Accounts, through buying back Government Debt in the Secondary Market.

            So you see, that Lord Turner’s plan would work. It is nothing like Zimbabwe or the Weimar Republic. And it still complies with the Maastricht Treaty as the money was used to buy back bonds in the Secondary Market.

            Lord Turner should get the Nobel Prize for Economics, instead he’s be heavily criticised. all the best plans are, usually by the people who have vested interests – i.e. Private Banks.

        • zorro
          Posted November 29, 2012 at 9:04 pm | Permalink

          Reply to reply – Are you advocating keeping it…? :-)

          zorro

        • sm
          Posted November 29, 2012 at 10:50 pm | Permalink

          Would cancelling £375bn of paper promises between government divisions really change anything? After all if you can cancel it , or recreate them at any point?

          • Conrad Jones (Cheam)
            Posted December 4, 2012 at 1:43 am | Permalink

            The consolidated Balance sheet for all the Government Departments effectively cancel the debt out anyway. The only reason to keep it on the Balance sheets is to pretend to our European Masters (through Maastricht – thanks to John Major) that we haven’t created Public Money as we are only allowed to let our Banks create Private Debt money – that we then owe them interest on.

            “My God! you can’t have a Nation Creating it’s own currency.”

            I’ve got no problem with debt so long as it’s repayable and sustainable, unfortunately the amount of debt free money in the system has dropped from 20% (in 1960) down to 3% today.

            The Bank of England has to create more money in order to address the balance, and at the same time, reduce Banks money creating powers.

  26. pete
    Posted November 28, 2012 at 2:45 pm | Permalink

    There are fundamental differences in the way Canada’s economy works to ours.

    One is that Canada has a larger slice of its economy based on pulling things out of the ground for which prices are currently high and more importantly does not have outside institutions telling it what to do so has the freedom to make its own policy decisions as it sees fit.

    You have pointed our yourself that a country’s fortunes rest on wholesale energy cost which contribute to the cost of production. Throw in with this all the other red tape inspired by guess who and we are uncompetitive.

    The fact is that the UK along with the rest of the EU is not as competitive as it needs to be as we have too many imposed policy straight jackets in too many areas so a central bank governor will not be able to do much about so Dr Carney is in for a much harder task than he had in Canada.

    Whilst I am an environmentalist at heart I also know that its no good putting a chain round our ankles when the likes of China and India steam ahead unhindered building coal power stations like no tomorrow.

    Does the BBC and Libs not realize that carbon does not stay within borders?

    • Credible
      Posted November 28, 2012 at 5:29 pm | Permalink

      Indeed, Canada’s success is more to do with increasing revenue from massive oil and mineral reserves than anything else.

    • zorro
      Posted November 28, 2012 at 9:20 pm | Permalink

      Indeed, Canada’s natural resources are one of its major assets and why it is highly regarded as a relative economic success story….along with the fact that it does not have an overblown, kamikaze financial sector which has practically dragged this country to ruin through its excesses and effective blackmail of the government in 2007…..

      zorro

  27. Wilko
    Posted November 28, 2012 at 3:28 pm | Permalink

    Some opine about the Canadian banker assignment as if he could control the UK economy.

    Millions of individuals each decide what they want to buy, in multi-variate circumstances. Their behaviour is only loosely within others’ control.

    Tax allows Govt to buy what is important, but Govt wastes & complicates.

    A single source of income is adequate for RAISING money.

    Instead, Govt chooses immensely complex processes entangling economics in chaos.

    Tax used gently to moderate behaviour favourably, such as reducing smoking, is sensible. In contrast, tax on good actions, such as work or purchasing building repairs is destructive.

    Perhaps the UK needs a Simpleton with a hopper-shaped box, rather than a multi-talented juggler hoping & hopping between the edges of black holes.

    • Conrad Jones (Cheam)
      Posted December 5, 2012 at 12:42 pm | Permalink

      Wilko,

      Agree totally with your comments.

      Especially regarding “tax on good actions, such as work or purchasing building repairs is destructive.”

      One of the problems is that the Government is advised by neo-classical economists who learnt Economics based on how the World of Finance operated prior to the 1971 closing of the Gold Window. Banks, Money and Debt seem to be ignored from mainstream Economics Models.

      A recent Book “Where does Money come from”, written by PositiveMoney and the ‘New Economics Foundation’ hopes to instill a little reality into the way Economics is taught. It is very well researched and relatively easy to read by non Economists (foreword by Charles Goodhart, Professor Emeritus at the London School of Economics).

  28. Electro-Kevin
    Posted November 28, 2012 at 3:32 pm | Permalink

    Canada reduced its welfare state in the ’90s and is a very difficult country to move to without wealth or qualifications.

  29. James Reade
    Posted November 28, 2012 at 3:47 pm | Permalink

    Some commenters have noted the elephant in the room you didn’t mention John, notably the natural resources in Canada that have contributed dramatically to the great economic outcomes there in recent years. Albertans pay the least tax in the entire country as a result of the revenues generated for the exchequer from it.

    I think it’s probably a bit misleading to completely omit to mention that when comparing Canada to the UK?

    Reply: The UK has also benefitted from substantial reserves of coal, gas and oil, and from its success in building such a large financial and banking market in our time zone.

    • James Reade
      Posted November 29, 2012 at 3:05 pm | Permalink

      On the same kind of level that Canada has? And, specifically, since 2008?

      I don’t believe so, and hence I think your comparison of the two countries is pretty much rendered void by that.

      I do hope Carney does well, but he has left an economy buoyant from natural resources to arrive at one where the lay of the land is altogether more tricky.

    • Conrad Jones (Cheam)
      Posted December 5, 2012 at 6:11 pm | Permalink

      If the UK’s Financial Market is such a success, why is it being constantly bailed out ?

  30. Keith Willey
    Posted November 28, 2012 at 5:47 pm | Permalink

    Excellent article, although I am surprised you didn’t credit the Liberal Party of Canada with the implementaion of the fiscal restraint that enabled Canada to be in such a favourable position at the start of the current crisis.

    It is also, perhaps, worth noting that the Liberals inherited the earlier fiscal crisis, that you referred to in your third paragraph, from the Mulroney Conservative Government in 1993.

  31. alexmews
    Posted November 28, 2012 at 6:26 pm | Permalink

    I would echo many of the posters above who state that canada’s economy is different than UK so lessons are not so easy to take.

    But I would remark as follows

    – what happened to the Tory review of these ‘lessons’ while in opposition? Was there nothing to learn?
    – Canada has well regulated commercial banks. There is not by and large a casino system as with London and New York. Presbyterian roots run deep in Ontario!
    – Canada went through a deep recession and a currency crisis in 1980s and 1990s where deficits, the national debt and debt repayments were all national issues for many years. The scale of the crisis in the UK – some 5 years on – remains a matter of debate. This is crazy. The government, led by taxpaying voters, needs to force this issue. That happened in Canada. Canadians had to cut the deficit and pay down debt or face currency ruin.
    – and they do have a money tree – gold, oil, hydro etc. By and large (and unlike Norway) I think the UK has squandered its natural resource wealth.

    there are many upsides to the Uk as regards to Canada (where I was born and where I grew up) – but the financial husbandry of the country by various governments over many years, and frankly the weakness of the electorate to being bribed with their own money and not olding politicians to account is not one of them!

    • sm
      Posted November 29, 2012 at 11:18 pm | Permalink

      Our politicians are past masters at avoiding accountability reference pledges like recall powers and cast iron guarantees. Glad its being recognized externally.

  32. Jon
    Posted November 28, 2012 at 8:43 pm | Permalink

    That environment which he came from would indicate to me that he may have a different mind set and perhaps question how things are here. Time will tell.

  33. Conrad Jones (Cheam)
    Posted November 28, 2012 at 10:35 pm | Permalink

    If the Canadian Economy is so strong, why does the Canadian Government have to provide insurance to the Canadian Banks in the form of the Canada Mortgage & Housing Corporation (CMHC) Insurance.

    This insurance is backed by tax payers and protects Mortgage Lenders against Mortgage Defaults.

    If the Canadian Housing Market crashes, the Banks will be protected by tax payer funded insurance. there is not enough money in the CMHC Fund to cover all potential losses so Austerity will have to be used to pay the Banks.

    The CMHC allowed Banks to increase Mortgage Lending which increased House Prices making it more expensive for people to buy a House in Canada.

    “Since CMHC is insuring so many mortgages, the banks have no incentive to test the credit-worthiness of home purchasers. Then the mortgages can be neatly packed into MBS securities and have a CMHC 100% Canadian guarantee on the back of the investments, thus insuring end-investors these papers are insured from loss”.

    Mark Carney mentioned CMHC – by implication; in a BBC HARDtalk interview, but it was hard to say whether he thought it was a good idea or not, he just said that the Canadian Housing Market is overheating. The last thing we need is a new Govenor of the BoE who is vague.

    Canada has got the same problems we’ve got. Keep watching the Housing Market over there.

  34. Bickers
    Posted November 29, 2012 at 12:20 pm | Permalink

    Could it have anything to do with Canada having taken an axe to public spending; a 20% cut I seem to recall.

    Unless the UK government gets a grip and slashes government spending and red (EU) tape then I’m not sure Carney alone can turn the economy around.

  35. Lindsay McDougall
    Posted November 29, 2012 at 2:07 pm | Permalink

    In 2001, UK public expenditure was approximately 36% of GDP. There was a huge popular demand for better health care. Since the UK runs its health care via a nasty Stalinist monopoly known as the NHS, that implied an increase in public expenditure. If the increase in 2001 public expenditure were confined to health care (there was no popular demand for any other major increase in public expenditure), total public expenditure in UK would be approximately 39.7% of GDP, as in Canada.

    I therefore have a simple proposal for the Chancellor of the Exchequer. Produce a breakdown of UK public expenditure in 2001, UK public expenditure now and Canadian public expenditure now. Then tell us where our extra expenditure is going and whether it is productive.

  • About John Redwood

    John Redwood has been the Member of Parliament for Wokingham since 1987. First attending Kent College, Canterbury, he graduated from Magdalen College, and has a DPhil from All Souls, Oxford. A businessman by background, he has been a director of NM Rothschild merchant bank and chairman of a quoted industrial PLC.
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