The Bank of England, money and growth

Current UK monetary policy is in transition. The present Governor of the Bank of England inherited a mess of a policy, and an institution which had presided over the biggest disaster in Central banking since the 1930s. The Bank of England allowed or even encouraged an unsustainable credit and property boom prior to 2007, with over expansion of commercial banks balance sheets. The competition authorities reinforced the Bank’s mistakes by allowing mega banking mergers to increase risks in the banking system. The Bank then switched in 2008-9 to too tough a stance, starving markets of liquidity and undermining the very banks they had allowed to grow and inflate.

Since 2008 the Bank has sought to drive the UK economy with one foot flat on the floor with the accelerator of money policy, and the other foot hard on the brake with banking regulation. At first the brake won and the economy made little progress. More recently there has been enough monetary effect to offset the brake, and the brake itself has relaxed a little as banks repair their balance sheets. Now it is time to ease the brake more, and to apply less accelerator, to return to more normal driving.

Let me explain the metaphor. Today the commercial banks have much more cash and capital than in the dark days of 2007-9. The Bank now appears to be changing the pace of its demands for more, and may allow sensible increases in loans again to finance economic recovery. The UK needs massive investment in energy, transport , tech and industrial capacity. More  of that needs conventional bank finance.

At the same time savers deserve a return on their longer term savings and the artificial bubble in bonds needs gently deflating. Longer term interest rates are too low, and the stock of QE held bonds  needs to be gradually brought down. Irregular monetary policy has produced gross distortions and inflation in certain asset prices. The bond bubble has occurred alongside property price rises making  homes and commercial property too dear for many UK taxpayers to afford.

We should not wish to continue with the past pattern of asset price inflation, very low interest rates, and banking inability to finance investment for recovery. The UK needs a major expansion in investment capital, with new power stations, roads, rail capacity, water capacity, better digital technology for public service provision, better broadband and  much else, as well as substantial  capacity increases in manufacturing. Savers need to be offered a decent return on their savings to attract capital into more productive uses, and to expand the asset base to control asset price inflation.

Meanwhile the monetary madness remains the popular orthodoxy on the continent, with the European Central Bank likely to hit savers again and to carry on creating more money.


  1. Lifelogic
    December 3, 2015

    Indeed the banks are now far too constrained by totally ill conceived regulations on lending and slotting rules. Even opening a bank account can be an absurdly long process. Hardly a day goes by when I do not get another demand for copy passports, US tax declaration forms, details of new worse banking terms or requests for utility bills. They are not judging lending on risk but on these contrived rules.

    I tend now, wherever possible, to cut these middle men and their inconvenience, margins and fees out.

    How can it be that the bank pay so little interest and yet charge so much on lending even to customers far low in risk than the banks and offering good security. More real competition is needed and a real return after tax and inflation for savers.

    1. Lifelogic
      December 3, 2015

      Monetary madness indeed remains the popular orthodoxy on the continent, with the European Central Bank likely to hit savers again and to carry on creating more money.

      It is just another way to tax people, this that so they can keep they pay power and pension and governments can continue to waste money hand over fist. Tax, borrow and print, keep expanding the bloated parasitic state until finally it kills the host it feeds off.

    2. majorfrustration
      December 3, 2015

      Seeking some taxi money prior a trip to Spain I was asked by HSBC to show my passport despite being a customer for over 50 years. Seems daft to me as I can use a debit/credit card abroad unhindered. As for the margin between what savers receive and what borrows pay – well that’s how the Banks are repairing their balance sheets

      1. Lifelogic
        December 3, 2015

        They also sometimes ask impertinent question about what you want the money for or where it comes from (if you have anything over about ÂŁ1000). I am often tempted to give them some daft reply.

        Hardly worth paying it in as they pay so little interest negative after tax and inflation, charge such large fees and are not even secure as we have seen. Let us hope the internet can continue to cut them out more and more. Just as UBER is doing to the old anti competitive Black Cab monopoly they had going for so long. Why on earth can UBER caps not use bus lanes anyway. A cab is a cab UBER or Black. Mind you a cab is just a car too, though less efficient as it need a professional driver.

        1. oldtimer
          December 3, 2015

          Tell them to mind their own business.

        2. APL
          December 4, 2015

          “They also sometimes ask impertinent question about what you want the money for or where it comes from. ”

          This is the way the totalitarian state works. The banks don’t give two figs what you want the money for, it’s the government that ha forced the banks to ask inane questions. The government would much prefer you use electronic funds, it so much easier to trace.

    3. Bob
      December 3, 2015


      “How can it be that the bank pay so little interest and yet charge so much on lending even to customers far low in risk than the banks and offering good security.”

      The govt have given the banks a licence to fleece their customers in order to rebuild their balance sheets after having looted billions of pounds in hugely inflated remuneration packages.

  2. Lifelogic
    December 3, 2015

    Excellent article by Matt Ridley in the spectator on all the pointless damage and many deaths caused by the “do gooders” of the green religion and the climate, religious festival types in Paris.

    A great shame Corbyn dared not to whip his MPs. He will have to fight another day one assumes. What complete irrational and emotion tosh from Mr H Benn. He sounded totally pathetic to me, no rational argument there at all. He seemed to think he was addressing dim primary, school children.

    Just seven Tories voted against this counterproductive terrorism incubation project of Cameron’s. Not even the semblance of a long term strategy from Cameron, has he and all these Tory sheep, learned nothing from Iraq, Libya, Afghanistan? How depressing.

    reply I did not vote for the government’s motion as I was not persuaded there are the ground troops to guide the bombs nor a political strategy to govern Syria.

    1. Lifelogic
      December 3, 2015

      Well done, I have not see an abstention list.

      Buy why so very few and so many career MP/sheep? This even after all the recent warmongering disasters we have seen. Group think lunacy again like the ERM, the EURO, the EU and the warming religion I suppose.

    2. Lifelogic
      December 3, 2015

      No one that I heard was even trying discussing ground troops to guide the bombs, other practicalities or any long terms political strategy to govern Syria.

      It was all about gay people being thrown off buildings and other vile acts of violence against women and men. Little reality and practicalities came into the debate from the proponents of bombing.

      I cannot help thinking that anyone using the acronym Daesh is certainly not to be trusted and is simply trying to deceive people with language just like the BBC. It is not just Islamic State that is conducting Islamic terrorism the problem is far, far larger than that.

    3. Narrow Shoulders
      December 3, 2015

      Reply to reply

      Good on you sir!

      Voting against for tangible, reasons that could be corrected has greater merit than a pacifist refusal to engage in the debate.

    4. Jerry
      December 3, 2015

      @LL; (re Syria vote) Sorry but silly insults about “addressing dim primary, school children” say far more about those who make them than those they are direct towards, Mr Benn was one of the few MPs who actually made any case for such bombing (he made a batter case than Cameron did!), and I say that as someone who would not have voted for such action, and consider the UK at 6am this morning to me more at risk than at 6pm last night.

      @JR reply; Indeed you did not vote for the motion, but nor did you vote against it -according to the list I’ve read, apologies if incorrect, blame the BBC, who seem to be towing the government line, if not actively kowtowing, at the moment…

      1. Lifelogic
        December 3, 2015

        Well, I went through his whole speak about vile attacks on gays and women, they dispise this and that, fascist need to be destroyed. …. but what is the plan, how will the bombs help, who will be left in control at the end? Nothing but emotional table banking twaddle. He makes even his dad look sensible. Not once did he address the fact that most Islamic terrorism has nothing to do with IS nor that the Paris bombers were from Belgium, nor the issue of open EU borders nor anything else very much. Given all the absurd cheering at the end perhaps addressing it at the level of children was right given his audience. Where has just bombing ever done anything much but harm? Who are these 70000 troops?

        1. Ken Moore
          December 3, 2015

          Agreed, it was a depressing spectacle the majority of MP’s getting all giddy for Mr Benn like excited sea lions demanding to be thrown another fish.
          It must have been just like the old days for Call me Dave when ‘the Master’ Blair was giving his sermon from the commons pulpit.
          I wonder if Mr Benn wears any make up ?.

          Finally Mr Cameron has got his own phony war just like his hero.

          These people have forgotten how to think rationally – the decision to bomb was an emotionally pumped up response borne of a desire to be seen to ‘do something’.

          I’m surprised all out nuclear war wasn’t tables such was the fury vented in a series of incoherent ramblings. ISIS attacks on political correctness with it’s appalling treatment of minorities seems to be Mr Benn’s main concern…so is he going to also bomb Saudi Arabia and the rest of the Arab world ?.

          I was left with the impression our MP’s (with notable exceptions) are not interested in doing something constructive ..they just want to feel better about themselves.
          Well done Dr Redwood for abstaining and not falling for the emotional diarrhoea of Mr Benn and co.

          1. Lifelogic
            December 5, 2015

            Indeed, I agree fully.

        2. Jerry
          December 3, 2015

          @LL; I didn’t say that I agreed with Mr Benn (I thought I made that clear?), I just said that he made a better attempt at justifying the need for the UK to (again) go to war than Mr Cameron did (or indeed Mr Hammond). Oh and as for terrorists being from Syria, Belgium, France, Iraq, the UK (remember 7th July 2005 attacks) or were ever, it is not were such people live or were born but from were they get their excuses and why

          @Ken Moore; “Well done Dr Redwood for abstaining and not falling for the emotional diarrhoea of Mr Benn and co.

          Well yes if sitting on ones hands is doing something, after all voting against a government motion is not voting for the opposition, surely to do the latter would mean voting for the opposition amendment (that, if passed, would fundamentally alter the purpose of main motion)?

    5. majorfrustration
      December 3, 2015

      Total waste of time and money. As for the political strategy its simple – Cameron will now be able to join “the club”.

    6. Denis Cooper
      December 3, 2015

      Well, JR, it’s not easy to devise a political strategy to govern a country where people are still prepared to slaughter each other over something which happened fourteen hundred years ago, is it?

      The present political strategy for the government of Syria is essentially a negative strategy, that Syria shall NOT be governed by Islamic State.

      Which has very largely but not entirely replaced the previous essentially negative strategy, that Syria shall not be governed by Assad.

      I can’t say I’m pleased that circumstances have arisen where we have little choice but to get involved in rooting out the greater of these two evils.

    7. Chris
      December 3, 2015

      Reply to reply:
      List from Conshome website of those Conservative MPs who voted against the action in Syria:

      “Expectations of the number of possible Tory rebels ran somewhere between ten and fifteen, so Government whips will be pleased that in the end they trimmed the number down to seven (with seven abstentions).

      Here is the list of all seven who voted against the motion:

      John Baron (Basildon and Billericay)

      David Davis (Haltemprice and Howden)

      Gordon Henderson (Sittingbourne and Sheppey)

      Philip Hollobone (Kettering)

      Julian Lewis (New Forest East)

      Stephen McPartland (Stevenage)

      Andrew Tyrie (Chichester

      Reply Those of us who abstained did so because we did not support the government’s wish to bomb, given the rest of what was said about ground troops, intelligence, political strategy and peace process. Nor did we agree with Mr Corbyn. In a Yes/No system there are times when your view is not represented by either the proposition or the opposition. It does not mean you are without a view, and it does not stop you seeking to influence the outcome.

    8. Timaction
      December 3, 2015

      The Westminster Village hasn’t represented me, my family, friends or other English people for a long time. This utterly pointless war will come home to roost. We will discover that Cameron is supporting another EU or American foreign policy disaster in due course. He has proven to a total fool on everything he says and does.
      Ignoring the Governments msm propaganda as usual I see Nigel Farage standing up for Britain again in the European Parliament opposing their plan to bribe Turkey to stop the economic migrants and stopping their fast track visa and membership of the EU. Do your leaders actually think its a pleasure to have the overcrowding, congestion, waiting lists and a disappearing culture? History will show the disaster of the legacies and their plotting and lies.

      1. Denis Cooper
        December 3, 2015

        The plan to bribe Turkey partly with money that we have contributed to the EU budget, notwithstanding our treaty opt-out from the EU immigration and asylum policy AND ANY FINANCIAL CONSEQUENCES THEREOF.

    9. Roy Grainger
      December 3, 2015

      You abstained didn’t you ? Why not vote against ?

      Reply Because my view was neither that of the government nor that of Mr Corbyn who led the opposition to the government motion.

    10. Richard1
      December 3, 2015

      What’s the logic of bombing a terrorist in Iraq but not doing so in Syria? I can see logic in saying we should be anywhere near either Syria nor Iraq (though I don’t agree with that) but I cant see why one and not the other. (Arguments about invitation from the govt arn’t relevant as Syria doesn’t have a legitimate govt & those who can claim some legitimacy in the region are requesting support from us).

      Separately, Corbyn and his henchpersons are emerging in their true militant tendency colours in denigrating Labour MPs who are off message and seeking to purge the Labour party of non-Trotskyites. Corbyn has just come out with some drivel about ‘now there will be civilian casualties etc..’ implying on the heads of those who voted for action be it. What does he think’s happening at the moment at the hands of Deash or whatever we should now call it?

      1. Gary
        December 3, 2015

        who says Syria doesn’t have a legitimate govt? you? The trouble with you neocons is you make it up as you go along to suit yourself. eg. get out of the Golan heights, by UN resolution. You cannot just annex places and countries because you want oil, lebensraum, puppet govts or just because you feel like it.

        Cameron and his ilk never saw a war they didn’t like to get involved in. Habits of Empire die hard.

    11. The prangwizard
      December 3, 2015

      You are saying that in this imperfect world you want perfection before you risk a decision.

      I take it therefore, you oppose the police who have said in fighting terror on the streets of England they intend to use aggressive force. They will not risk waiting for perfect opportunities in taking the fight to the terrorists.

      I suppose you will require them to back off in case they cause casualties while the terrorists calmly murder innocent people, maybe people you know and love.

    12. Leslie Singleton
      December 3, 2015

      Dear John–I haven’t said much on this to date but I view with derision some of the overblown certainties being put forward especially on the ‘do nothing’ side (BTW I can at least understand your abstention) but I do get fed up with the stuff about no political strategy for afterwards. Allow me to point out that there isn’t a strategy now worth a damn so that factor is no factor at all. Till Daesh is taken out there is no hope whatsoever of a future political strategy. Reading the posts here has now persuaded me and I support Parliament’s decision–we must do what is clearly at hand not fret about what lies dimly at a distance. Changing gear, is there any reason why our jets do not seem to carry the large RAF roundels anymore, at least not that I could see? I ask partly because I believe Turkey said they did not or perhaps could not recognise that Russian plane.

    13. turbo terrier
      December 3, 2015


      He seemed to think he was addressing dim primary, school children.

      In the case of 54 members he could be right.

      One in particular decided it was better to be unveiling a portrait of himself than being in the house to discuss the pros and cons in the original debate.

  3. Iain Gill
    December 3, 2015

    Yea but on the continent in many places I could buy a proper family house out of small change. Why have we allowed fantasy prices here?

    1. libertarian
      December 4, 2015

      Iain Gill

      “Yea but on the continent in many places I could buy a proper family house out of small change”

      As Ive told and shown you many times you can do that in the UK too.

      1. Lifelogic
        December 5, 2015

        Indeed just go to somewhere with no jobs and lots of empty houses. Perhaps somewhere where the high energy using industry has had to close for green religion reasons.

  4. Richard1
    December 3, 2015

    Get ready for demands for and possibly agreement on ‘green quantitative easing’ out of the Paris jamboree. The idea of unlimited borrowing for political spending programmes has an inate appeal to statist-leftists. Of course it must be resisted.

    1. Mitchel
      December 3, 2015

      Who is going to resist it?The internationalist left and the corporatist-globalist right both seek a form of world government (one government,one currency,one central bank,no democracy) and they have their hands on the levers of power thanks to western governments effectively handing over sovereignty to the UN,EU and various other transnational bodies that the aforementioned now control.”We”are left powerless….short of revolution.

  5. JoeSoap
    December 3, 2015

    Reply to reply
    A good approach but didn’t you think about voting against on this basis? Surely this is a yes or no matter rather than a don’t know one?

  6. Narrow Shoulders
    December 3, 2015

    You mention over inflated house prices in your article which have been adversely affected by money creation since the 70s. Banks able to create money, making a good margin on it, at a rate greater than wages are increasing can only ever reduce standards of living.

    Resulting from this money creation policy interest rates can not rise as home owners are over leveraged and realistic rates will bring down the whole ponzi scheme. When your economy is based upon rising property values (and immigration let us not forget) it is unwise to risk the asset base by charging realistic rates for money.

    1. forthurst
      December 3, 2015

      According to Nick Timothy ex-aide to Mrs May, growth of GDP, which Osborned believes is key to balancing his books, is to be accomplished by rising immigration which Timothy claims the Home Office has ceased attempting to control arising from pressure from the Treasury (which presumably is filled with English haters); it is very doubtful that more immigration will do more than put further pressure on the long suffering English when they try to access the resources which are their birthright. What the BoE produces is funny money, in any case, and the government can help themselves when they want to; what is not funny money is that required to pay our external debt which will continue to mount as a result of our insane unselective immigration and industry destroying energy policies.

      (Should the neocon skunks achieve success in Syria and turn it into Libya II, Qatar will duly get its gas pipeline and London house prices will crash through the stratosphere, push out through the ionosphere towards the Van Allen belts, at which point, London will formally cease to be part of England and will embrace a new cultural identity etc ed

      1. Dame Rita Webb
        December 3, 2015

        Is there a full moon tonight?

  7. Margaret
    December 3, 2015

    Hilary Benn spoke well . He got to the heart of what make people tick .In fact most contributions were very well founded although some did waffle on and got far away from the point, this being of the attitude of ISIL and their contempt for western life, the opinion that by violence and murder their aggression is the rule of law which they consider superior.

    The chip on these peoples shoulders and the undercover supporters who call tragedy unfortunate is a disgrace to mankind. Life is not about reading articles which other people have written, stories ,as in scriptures which gives life its meaning , it is about what people think and do. These people who use other peoples written and well put together pieces of literature to attempt to give them leverage ultimately believe in a false construct.

  8. Ian wragg
    December 3, 2015

    What’s the betting that Gideon resorts to more Q. E.. when the wheels come off his immigration led growth strategy.
    For someone who expects to be crowned leader of the rump Tory Party he’s incredibly stupid.
    I see Dave has been told to drop his benefit demand from EU negotiations which will make them totally useless.
    So we get Associate Membership which in fact is an extra 5 years to sign up to economic and monetary union.

  9. Lifelogic
    December 3, 2015

    Philip Hammond this morning suggested that the opponent of the bombing were pacifists and conscientious objectors. A few may well be most are nothing of the sort. They just recognise the realities on the ground, the complexities of the situation, the need for a long term strategy that could work and that it will almost certainly do more harm than good.

    Margaret Beckett seemed to think we should bomb and probably kill thousands just, so the French did not feel too put out. What sort of reason is that to kill thousands of civilians and incubate further terrorism?

    Max Hasting had it largely right on Newsnight:- “give me one example when air power resolved anything?”

    It was largely emotional claptrap from MPs yesterday, hugely depressing.

    1. yosarion
      December 3, 2015

      Then I would ask Mr Hammond if he has ever been in a position with a Man targeted in the sight of his personnel weapon with the safety off and the slack taken up on the trigger asking if he can fire, because that is soldiering, and I don’t think that Pratt would no what end of a Riffle from the other.

    2. Anonymous
      December 3, 2015

      Lifelogic – We were told that invading Iraq, Afghanistan and bombing Libya would rid us of the threat to our civilisation.

      Instead it’s got worse.

      Then what after ISIL ? This is becoming like a game of whack-a-mole.

  10. Roy Grainger
    December 3, 2015

    It is interesting you raise the issue of the QE held bonds. Discussion always centres on when interest rates will rise rather than when these bonds will be sold. I assume the answer is “never”.

    1. JJE
      December 3, 2015

      Not until rates are above 2% according to the Bank.
      Which may or may not be the same thing as never, but certainly isn’t any time soon.

  11. gary
    December 3, 2015

    “he Bank of England allowed or even encouraged an unsustainable credit and property boom prior to 2007, with over expansion of commercial banks balance sheets”

    aided and abetted by this and the previous govt with bailouts and help to buy. Incredible myopy!

    now we are in such a pickle there is no way out without economic collapse. I hope the public reaction will be swift and just.

  12. Denis Cooper
    December 3, 2015

    “The Bank of England allowed or even encouraged an unsustainable credit and property boom prior to 2007, with over expansion of commercial banks balance sheets.”

    As Brown had relieved the Bank of its responsibility for the prudential supervision of commercial banks you really cannot blame the Bank for allowing their balance sheets to become dangerously over-expanded.

    That was the responsibility of the independent financial regulator that Brown had set up in accordance with EU policy, the Financial Services Authority under the leadership of Sir Callum McCarthy:

    As far as the “unsustainable credit and property boom” was concerned, with hindsight few people will now doubt that the Bank held interest rates too low for too long. However if Parliament passes an Act telling the Bank to do something then we expect the Bank to do it, not defy the will of Parliament by doing something entirely different.

    In 1998 Parliament told the Bank that the primary objective of its monetary policy must be to keep a measure of price inflation defined by the Treasury close to a target defined by the Treasury. That was the task given to the Bank, and it actually succeeded in doing what Parliament and the government said it should do for the best part of a decade.

    The Bank was not responsible for choosing a measure of inflation, RPI-X, which was a measure of consumer price inflation with only a small contribution from property costs, or for then changing that to the EU’s measure of consumer price inflation, CPI, which has an even smaller contribution from property costs. In fact the Governor Mervyn King did all that he could do when he warned that this change might disrupt the Bank’s conduct of monetary policy.

    The Bank was not responsible for our trade policy, which is of course largely the EU’s trade policy, and it could not be blamed for the fact that cheaper imports were holding down consumer price inflation, as indeed it noted. Nor was the Bank responsible for our immigration policy, which of course is partly subject to EU law, and led to wages being depressed while increasing demand for housing, or for our housing policy, with supply outstripped by unplanned and uncontrollable increases in demand.

    It may be noticed that the effects of our EU membership run like a thread through all of this. That is not to say that everything would have been fine if our national government and Parliament had not been constantly albeit often surreptitiously trying to conform to EU requirements and recommendations, just to point out that the EU made its inputs at multiple points which should not be ignored.

    Reply The Bank was responsible for the stability of the banking system, yet presided over an unprecedented degree of instability 2006-9.

    1. Denis Cooper
      December 3, 2015

      You’ve replied to my comment but not published it!

      The FSA was responsible for the prudential supervision of commercial banks, and it fell down on that job big time. First run on a retail bank in the UK for how long, over a hundred years, and that was down to the failure of the FSA.

    2. yosarion
      December 4, 2015

      The rot was set before 2006, Northern Rock were allowing 7x income on self assessment in 2004, now people are struggling to get a mortgage because of the over harsh societies and their rules. 4x income worked until by to let over inflated the market with a bit of New Labor mass Immigration

  13. Geoff not Hoon
    December 3, 2015

    I live in hope that our Chancellor doesn’t copy his Cyprus opposite number and take a big percentage of savers and current account monies in one swoop. Oh, wait a minute. He is doing just that but over a longer period by holding bank rate at virtually nil so savers pay to put the banks salaries and bonus’s back where they used to be. In 7-8 years since the financial crisis we have seen little in the way of serious new players in the lending/saving field. Doubtless red tape and unnecessary government interference have put off many a new entrant.

    1. JJE
      December 3, 2015

      And those that have come in have been hit with a massive increase in their corporation tax to replace the levy that HSBC refuses to pay. And they are heavily restricted by regulation of the rate at which they can grow their balance sheets. All in the name of financial stability.

  14. Bert Young
    December 3, 2015

    I was very pleased to read that you had abstained from voting yesterday ; supporting Cameron was a risky proposition for this country and we must now await the consequences .

    Monetary madness on the Continent can only lead to further disruption and the demise of the EU ; pumping a worthless currency into the coffers of national banks will inspire a spending spree . Paying off debt and installing controls would be a much better medium and longer term benefit .

    In this country the Banks ought to be inspired to lend more to industry and the smaller businesses rather than continuing to stoke the fires of the property market . Property prices have become seriously over-valued and need to be brought into line more with the man in the street . If there is a correction , the collateral basis of the Banks will be caught out so the action of the Bank of England is timely and sensible ,

  15. Roger
    December 3, 2015

    John. Off topic I’m sorry but I noticed that you abstained on last nights important vote. I would have thought that every MP would have a positive opinion on this subject. I wonder if you would give us your reasons.

    Reply I have done so in my pieces on this site about Syria.

  16. oldtimer
    December 3, 2015

    If you wish to see a real revival in savings and investment then distortions in the tax regime need to be removed too. At present CGT rates are a disincentive for investors to switch into new investments; you pointed out the other day the drop in CGT receipts. It seems that Mr Osborne is keener in seeing more Chinese investment in the UK than in encouraging private UK investment.

  17. Bob
    December 3, 2015

    “reply I did not vote for the government’s motion as I was not persuaded there are the ground troops to guide the bombs nor a political strategy to govern Syria. “

    Good for you Mr Redwood.

    If Mr Cameron was serious about defeating ISIS he would not be agreeing to giving taxpayers money and fast track visa issuance to Turkey (one of ISIS’ main trading partners).

    The terrorist problem started with Labour letting in any Tom, Dick and Harry from the third world; a policy that the Tories seem happy to continue with despite Mr Cameron’s utterences to the contrary.

    1. Iain Gill
      December 3, 2015

      It’s also the religious segregation in schools, and rubbish schools in places like Bradford, Luton, and Slough. Much (more serious problem ed)

      1. Lifelogic
        December 3, 2015

        Indeed tax payers money used to make huge damaging cleavages in society. Have we learned nothing for Northern Ireland, and there both sides were even Christian or claimed to be. Incubating terrorism using your taxes to do so.

  18. Denis Cooper
    December 3, 2015

    “… monetary madness remains the popular orthodoxy on the continent, with the European Central Bank likely to hit savers again and to carry on creating more money.”

    That’s because the eurofederalist, politically driven, economic madness of the EU single currency remains the popular orthodoxy, but the governments of some of the eurozone states would quickly collapse if the ECB stopped buying up their bonds.

    Leading to disintegration of the eurozone rather than its planned expansion to take in all of the EU member states, including us if we were still in the EU.

    As an aside I point out a recent report from Open Europe, here:

    “Poland backs proposals to establish the EU as a multi-currency union”

    “Polish daily Rzeczpospolita reports that Polish Europe Minister Konrad SzymaĹ„ski has come out in support of UK proposals to formally declare that the EU is a multi-currency union. Open Europe’s Pawel Swidlicki is quoted as saying that such a change would not only be symbolic but also practical as it would make it harder to implement discriminatory practices such as the ECB’s plans to force all clearing houses processing euro-denominated transactions to be located within the Eurozone, and that such a solution would ease the pressure on countries such as Poland, the Czech Republic and Sweden which are currently legally obliged to join the euro but for whom this is not currently politically feasible.”

    Well, in line with what I’ve been saying for more than five years I’d say that the obvious and most effective way to ease that pressure on those non-euro EU member states would be to expressly relieve them of the legal obligation to join the euro, and to do that through an explicit EU treaty change rather than by implication through a formal, but not legally binding, declaration that the EU is a “multi-currency union”.

    I also note that in google translation the original source it refers to:

    “those who, for example, does not want to introduce the euro over the next 20 years”.

    So the ambition that they will eventually join the euro has not been abandoned.

    1. Iain Gill
      December 3, 2015

      Anecdote from last night in the passport queue coming home, about 3 British and hundreds and hundreds of Romanians.
      We really do have out of control immigration.

      1. Anonymous
        December 3, 2015

        Iain – Out of control immigration is part of policy for economic growth.

        When I hear the likes of Benn stating “… to protect our citizens.” I feel ill at the lies.

    December 3, 2015

    No-one is going to lend you their car JR until you come off metaphors. Simultaneous braking and accelerating on the one-way road to the forthcoming overheating housing market blowout. No excuses. 100% visibility.

    Off topic but do RAF pilots become radicalized prior to bombing people or simply do their duty in line with the values imparted to them by their originating community

  20. Dennis
    December 3, 2015

    Your reply JR -“Because my view was neither that of the government nor that of Mr Corbyn who led the opposition to the government motion.”

    Voting ‘No’ to the proposition does not mean you necessarily agree with the views of the No group. You vote on the proposition not on anything else. I think you chickened out.

    1. Chris
      December 3, 2015

      Yes, Dennis, his answer did not convince me either.

  21. Maureen Turner
    December 3, 2015

    I listened to a considerable part of yesterday’s debate and it didn’t change my thinking that
    there hasn’t been enough thought given to the ground war, ie., boots on the ground. The 70,000 from Syria has been discounted unless Assad is removed, so where does that leave Russia? Could it be Pres. Putin’s interest in having a military base in Syria is greater than his loyalty to Assad or more likely does one require the other?

    The tentacles of IS now appear to stretch right across North Africa and as far as the Middle East so where does the bombing stop? This morning on radio Mr. Fallon remarked – this will take three years to sort out but surely this is being hopeful in the extreme and contradicts the PMs own statement as being “generational”.

    I appreciate the UK can’t sit back and allow IS to terrorise Europe or let others fight on our behalf but as no one seems to give much consideration to anything other than bombing the situation remains much the same as it was months ago. If ground troops are to be used, as Mr. Fallon hinted at this morning, will another debate be necessary or will this be seen as merely a necessary progression of the wars’ aims. The PM has said on two occasions the UK will not engage UK foot soldiers in Syria so whose ground troops does Mr. Fallon have in mind.

    By abstaining in yesterday evening’s vote, and of course this is just my opinion, you did the only sensible thing.

    1. Mitchel
      December 3, 2015

      You fail to mention Iran which seems to be dead set on keeping President Assad in power and is a major force in the ground war alongside the Syrian Army.President Putin is unlikely to accept any western promises regarding the preservation of Russia’s interests in a post-Assad Syria-he simply(and rightfully) does not trust the US,Turkey or Saudi Arabia(or their western mouthpieces) and he continues to ratchet up the tension with Turkey (see the Russian military briefing yesterday and today’s state of the nation speech,barely covered,if at all on our TV news).The situation is so fraught with danger we must be mad to get involved.

      1. Chris
        December 3, 2015

        I found RT’s coverage last night very interesting, and the interview with Professor Paul Rogers, who has some expertise in the Middle East and has written and lectured about the problems there and the rise of terrorism, was most instructive. Far above anything the BBC produces. Cameron et al seems to be like fools rushing in (again) and it will not end well. We need experienced politicians with some wisdom and understanding, who are not concerned with their image, and making their mark.

  22. waramess
    December 3, 2015

    I read this article in the hope that it might provide a solution to the mess that exists but in vain.

    A monetarist at heart, the only solution offered is to spend even more: more power stations more rail investment more road investment maybe a Hoover dam and why not a few roads to nowhere?

    All at the behest of the Government I imagine for the commercial sector is unlikely to oblige when interest rates and thus returns on capital are so low they do not reflect the inherent risk.

    So, where is it all going? Having followed a monetarist agenda for the past few years we now have an economy that is not able to sustain interest rates at a higher level than zero without collapsing in on itself.

    Golly, nobody thought of that one, and we who pay mega bucks to all those experts for their daily advice might once again need to pick up the pieces and deliver more of our hard earned money into yet other flawed theories.

    Nobody, not even savers need to be “rewarded” for saving. This is no more than economic speak for “we don’t know what to do next!”.

    Put up interest rates and watch the economy collapse, yes, collapse in front of your eyes. Keep interest rates where they are and watch the economy collapse a little more slowly and elegantly in front of your eyes as investment dries up or, introduce negative interest rates and watch bad investments saturate the market as investors are rewarded with good returns for poor investment.

    So, what to do? Simple, go ask an Austrian; they have been telling you through Steve Baker and Douglas Carswell, amongst others how to get out of the mess we are now in but, as usual the Keynesians and the Monetarists know best.

  23. ian
    December 3, 2015

    The BOE has one job that’s to bailout the government and that has been it job since 1794, the birth place of fractional revere banking, the government prints bonds and sells them on the open market or to the BOE in exchange for money so it can spend money that it has not got so the government does not have to put up taxes to bribe the people at election time with their manifestos.
    Banks usual buy them with money printed out of thin air because they think they will always get their money back which they did not have in the first place by the government putting up taxes on the people, safe bet and it is also triple AAA rating on their balance sheet with property mortgages which are triple AAA rated if the money is lent out to a formal of good deposit and no more than 4 times earnings and over 25 years.
    At the moment it to keep the property market going up it as little as five percent deposit with government guarantees 15% or the banks will not lend and up to 8 times to 10 times earnings and up to 40 year mortgages which is a long way from where it should be and no change insight.
    A good rate of inflation is always needed for the system to work.
    If they went back to a system of a good deposit 4 times earnings and 25 years the housing market would go down by over 70% and the banks would have to take the loss on the money lent out which they did not have in the first place and the interest you pay to the bank would go up so you would be paying a 150,000 mortgage on a property worth 60,000 pounds.
    The banks would alright as long as no one loses their job and wages go up.
    The only way banks will lend for infrastructure is with government guarantees back by the people taxes, so what to do.
    Its a case of debt forgiveness, wages rising and interest rates going up.
    How does that work, the banks forgive debt on your mortgage in exchange for rates going up support by high wages, do away with government guarantees on home loans and put them on infrastructure loans and at the end of the day you do away with the BOE so the government can not overreach itself with bribes to the people and will not lend to mal invest and other banks will not have the people taxes to bail them out and also will not make mal investments but can still buy government bonds if they think the government is not going to waste the money.

  24. waramess
    December 3, 2015

    As usual our representatives in parliament deliberately take their eye off the ball when it comes to the Syrian issue.

    The issue is clearly not whether we like them or not and in consequence shall we send over a few jets to give them a bloody nose as it seems Cameron wishes to do nor is it to sit down and talk with them as it would seem Corbyn wishes to do.

    The issue should be whether either strategy will bring about the downfall of ISIS and if it will not then don’t do it for time is short and certainly far too short to be playing with toys.

    The only real strategy that will pay dividends is to stop the money.

    Interesting that the politicians have stopped talking about this presumably because it is too difficult or maybe we will need to hurt a few feelings along the way.

    Saudi Arabia are our enemies and they fund our enemies as do Qatar and others who buy their oil such as Russia.

    Stop selling Saudi Arabia arms and defence material; bad for employment but just think of what we are doing when we sell Saudi arms in order to protect themselves from the likes of ISIS whilst funding ISIS in order to attack us.

    Perhaps we should pause for thought at the prospect of ISIS rounding on the Saudis and taking control of the Saudi oil fields but far far better to remind the Saudis and call a double bluff.

    All the arguments in Parliament focus on strategies that will be good headlines and will play to the Americans and other Allies whilst forgetting the real mission.

    We should take great care for the prospect of ISIS gaining sufficient power in the coming years to unseat the Iranian power base and the Saudi power base and ending up with both financial resources and Nuclear resources and to do whatever they wish to the Western powers.

    Perhaps nobody really cares because it is not going to result in very good headlines.

  25. hefner
    December 3, 2015

    Regarding Syria, how comes that the oil fields bombed by the RAF had not been bombed before? How comes that the oil produced by these Da’ish held wells went to the market? Was it through Turkey? If it is, how comes that Turkey has not been called to justify this? Which oil companies have been involved? Is it because the UK in the past has long been a strong supporter of Turkey entering the EU?
    Those seem to be questions that have not been addressed during yesterday’s debate.

  26. ian
    December 3, 2015

    Banks will not mind losing capital they did not have in exchanges for more interest as long as it balances out, business is the big problem mal-investment everywhere accountancy companies should be struck off for what they have done, how do you get out of that without big job loses which you cannot afford to keep the banks and the change over in the housing market with big loses in the companies bond market and share market and pensions. How to keep people in their homes with mortgages and jobs and pensions.
    The sixty four dollar question. Catch 22.

  27. mike fowle
    December 3, 2015

    I had some doubts when Mark Carney was appointed as governor of the BoE, but assumed that a careful scrutiny had considered him the best candidate. Those doubts grew when he started pontificating about climate change etc. – showing he had little analytical ability. I can’t help wondering whether a Canadian can fully understand – viscerally – the British love affair with housing.

  28. petermartin2001
    December 3, 2015

    The UK needs a major expansion in investment capital, with new power stations, roads, rail capacity, water capacity ……… Savers need to be offered a decent return on their savings

    Interest rates are very low yet still there’s an unwillingness to invest in power stations, roads, water capacity etc.

    So we increase rate to give savers a better return, and these higher rates encourage investors to borrow at higher rates whereas they wouldn’t previously borrow at lower rates?

    Can someone please explain the logic of this argument?

    1. Edward2
      December 4, 2015

      You plainly do not borrow for business expansion at the moment Peter.
      Banks want near double figure rates of interest together with personal guarantees, big setting up fees, charges for meetings, charges for sending letters, charges for legal and accountancy reports and early repayment charges etc
      Credit cards charge near 30% and other money lenders charge over 100%
      And many small businesses have to use these to get the funds thy require.
      Yet savers are getting close to zero.

      1. petermartin2001
        December 5, 2015

        I do know that. The only time I’ve borrowed for a business venture I told the bank it was for home improvements! A bit of a fib maybe but they got paid back and were none the wiser!

        But we’re talking about borrowing for power stations, water supply, roads etc so there’s no need to involve the banks. Government has to be involved and it can set the interest rates at whatever it likes regardless of whether private sector money is involved too.

        In any case, you’ve not explained why higher interest rates will encourage more private sector borrowing even if the banks are just as bad as we both seem to think they are.

        1. Edward2
          December 5, 2015

          Well thanks for your admission of a possible fraud.
          There are different rates on loans for different purposes.
          Home projects are cheaper than business loans due to different risk profiles

          Why can’t major projects be privately funded.
          Many are.
          And there should be a fair return for saving.
          As Keynes said saving investment and consumption are linked and need to be carefully in balance

          1. petermartin2001
            December 5, 2015

            I don’t know about “carefully in balance.” The relevant national accounts equation which you might like to Google is

            GDP = C + I + G + (X – M)

            which says that total national income (GDP) is the sum of total final consumption spending (C), total private investment (I), total government spending (G) and net exports (X – M).

            It’s a moot point just what is counted as investment and consumption. If you are using a PC which was bought by a company it’s probably counted as an investment . If you bought it yourself it will counted as consumption.

            It doesn’t really matter in the end. We can say

            GDP = Total Domestic Spending + Net Exports.

            So, to increase GDP someone has to spend more, and that can only be:
            Government, Extra Borrowing or Exports as previously mentioned.

          2. Edward2
            December 6, 2015

            But thats not the relevant equation.
            I spoke about the need for savers to have a fair price for saving and currently it is not.
            And I mentioned Keynes theory that consumption savings and investment are linked and need careful balancing and currently they are not.
            As usual your equation makes just the State the producer of wealth through endless tax borrowing and spending
            A handy little equation for all on the left wing of politics.

          3. petermartin2001
            December 6, 2015

            I suspect you might be imagining this, but if you can find a reference I’ll take a look.

          4. Edward2
            December 6, 2015

            The link would be J M Keynes famous General Theory of Employment Interest and Money available at all good bookshops.
            I don’t think I’ve imagined it.

  29. Lindsay McDougall
    December 4, 2015

    The Bank of England is persisting with a monetary and banking policy of madness.

    (1) The public wants a situation where no bank is too big to fail. That means either the enforced break up of big banks, or requiring the banks to restrict their loan books so that their liquid assets to loan book exceeds a certain threshold.

    (2) The public do not want as taxpayers to be shareholders in banks. So why not sell the remaining shares in Lloyds and RBS PDQ?

    (3) Monetary policy is best enforced by inflation targeting. The inflation index used should include a measure of house prices and the sort of assets that the rich spend their money on – e.g. bullion, art and fine wines. It should exclude VAT, excise duty and stamp duty, reflecting underlying prices. It doesn’t matter if such an index is not intuitively understood by the public – it doesn’t need to be.

    (4) The process of rates and reigning in QE should begin now. We have a superb opportunity to target zero inflation.

    (5) As for fiscal policy, the Chancellor must have had a fit of madness. Why does he believe the OBR’s forecast of an average of 2.4% pa growth in GDP over the next five years, when the long term average GDP growth pa has been 2.0% since 1979, broadly irrespective of which party was in power? And what is the OBR forecast for GDP per capita or income growth, something of more interest?

    (6) The folly of the Chancellor’s revised fiscal policy extends down to the detail of his Autumn Statement on future tax and spend. Anyone interested should read Liam Halligan’s excellent article in the last Sunday Telegraph Business Section.

  30. petermartin2001
    December 4, 2015

    The spending which is necessary to revitalise the UK economy can only come from three sources:

    1) More export sales. More Import replacements.

    BUT: We’d all like these but are they going to be possible? Is there support for a lower pound to encourage exports? Are we prepared to manage with fewer imports?

    2) More Government Spending and /or Lower Government Taxation

    BUT: This is totally counter to the direction of Govt Policy.

    3) More Private Sector Borrowing leading to more more private sector spending and the build up of even more PS debt.

    BUT: levels of Private sector debt are already at record levels. Excess private sector debt has created a huge bubble in the property market. If (when?) the bubble bursts we’ll have another economic crash.

    So there are three big BUTs ! Something has to give, though, to get the economy back on track. What’s it going to be?

    1. Edward2
      December 5, 2015

      Im a little skeptical regarding the figures for personal debt.
      Most people are now using credit cards to make their day to day purchases but the majority pay off their bill in full each month yet all credit card purchases are counted as debt.
      Most car purchases are now made on monthly lease plans which are very attractive to purchasers many of whom could pay in cash if they wanted to.
      Mortgages are in the debt figures but paying monthly for a property is safe and normal way for having a roof over your head and cheaper than renting.

      So debt figures will be at record levels.
      There is many more of us and we are confident enough to take out a business loan, a home loan, a car loan and use a credit card.
      Doomsday scenario economists will always warn of doom.

      1. petermartin2001
        December 5, 2015

        I don’t know about doom but certainly the GFC has certainly caused major inconvenience!

        We need to be clear about the different effects of Government debt and Private Sector Debt.

        Excess government debt can cause too much inflation. I’m sure we can all agree on that. But because Govts don’t have to repay their debts they can’t cause the type of crashes that occurred in 1929 and 2008.

        Excessive Private Sector Debt can cause those crashes. Initially the loans that cause the debt stimulates the economy as the borrowed money is spent. But, as the spending power runs out of steam the debts accumulate and there is a danger that the economy will stall and possibly crash.

        It’s only extra government spending that can rescue the situation when this happens. It’s not usually good government spending. It’s spending on unemployment pay and schemes like ‘cash for clunkers’ etc. Spending we’d all rather avoid.

        So it’s better to have more sensible levels, and types, of govt spending now. And there is no reason not to, with inflation at 0% and spare capacity in the economy.

        1. Edward2
          December 6, 2015

          Love your statement “governments don’t have to repay debt”
          You live in an economic fantasy world

          1. petermartin2001
            December 6, 2015

            Living in A Fantasy World? Am I? Or is it that you just haven’t understood how it all works?

            If I owe you money I do have to repay otherwise you can take me to court or I’ll get a poor reputation on credit matters.

            But say the Govt owe you money in the form of some premium bonds. Sure, they’ll give you the money, if you cash them in, but effectively they are just swapping one type of government IOU (cash) for another type of IOU (the premium bonds). In what way is that Govt repaying its debt?

            The Govt can always create whatever cash it likes by issuing bonds, with the purchase of those bonds by the central bank being the last resort.

            The Government can, if it wants to, reduce its debt by taking off us more in taxes than it spends back into the economy, but it doesn’t have to, and it hardly ever does this.

          2. Edward2
            December 8, 2015

            Eventually you get to where many nations with your magic money tree attitude that “we don’t need to pay back our debts” gets too.
            Their ability to borrow off others is reduced to zero.
            Then all they have got is their printing press and a rapidly declining exchange rate.
            Its like trying to survive in a lifeboat by drinking sea water.

          3. petermartin2001
            December 10, 2015

            In a way I agree with you that its not a good thing for the Govt to be selling so much debt but its sells it not because it needs the money but because there is a healthy demand for it. You have the causality the wrong way around.

            If it didn’t sell it the pound would be lower , the trade deficit would be lower and the governments budget deficit would be smaller too. That’s not necessarily a good thing but at least it would stop everyone worrying so much.

            The present attitude of the government is just going to lead to disaster. There will be a crash – probably next year so I’d sell any shares you have. If you have a rental house – sell that too!

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