Central Banks cause recessions

I have often tried to explain that the Fed, Bank of England and ECB made two grave errors over the last decade or so. Most commentators now agree that they were too lax in their requirements for cash and capital for the commercial banks in the period up to 2008. Quite a few of us said so at the time, most now say so with hindsight. Their laxity allowed or encouraged commercial banks to overexpand, lending too much. We saw property, commodity and financial asset bubbles as a result.

Most still fail to agree that from 2008 onwards the Central Banks made the reverse mistake. They demanded too much cash and capital reserve of the banks, so there was too little cash and credit available for jobs and growth. The Central Banks helped bring down a few of the large banks by their precipitate action. Since then their constant pressure for stronger bank balance sheets has meant slow growth generally.

Tim Congdon is one of the few economists to explain all this. He has done so again recently. He also points out that Quantitative Easaing, a policy he recommended, was sufficient to prevent the Great Recession the Central Banks created from becoming a Great Depression. The artificial created money did enough to offset the worst of the money destruction from their approach to commercial banks.

My view throughout has been that the authorities should not have undermined the banks in the first place, and having done so they should have acted as midwife to new stronger banks more quickly to resume normal money and credit growth. In UK terms I argued for faster and more effective measures to get RBS and HBOS lending more again as a preferable answer to QE.

Whilst I accept Tim Congdon’s argument that QE was better than doing nothing when they visited the Great recession on us, QE has had unfortunate side effects. It has created a new price bubble in bonds and other financial assets. As the Prime Minister has pointed out, it has helped the rich with financial assets more than the rest of the population.

Today we see the dangers of the price bubble in bonds. The US authorities, wedded to ultra low interest rates all the time there was a Democratic President, look as if they now want to put interest rates up. Markets have decided that Mr Trump’s reflationary policies will require higher interest rates, and have sold bonds to raise the longer term rate of interest. As a result the dollar has started to strengthen some more.

Mr Trump’s reflation will take time, as he will need to fight through the tax cuts and spending rises he wants.In the meantime the USA is experiencing a monetary tightening. Tougher language from the Fed is pushing up expectations of short rates, and unwinding some part of the bond bubble is pushing up longer rates. The world economy does not need a monetary tightening in the USA all the time so many banks around the world remain prisoners of the tougher regulatory system that has given us slow growth. Nor does Mr Trump wish to see the modest rate of growth in the USA interrupted by the wrong monetary tightening. The Central Banks can mess it up again.

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61 Comments

  1. Caterpillar
    Posted November 21, 2016 at 5:42 am | Permalink

    Continuing debt based money creation needs to be seriously reconsidered.

    Within the existing system, as JR recognises, more central banks, economists and politicians need to recognise and respond to the fact that the structure of the economy is heterogeneous and time based. Very low interest and flat yield curves heavily distort resources finding their best use.

    Moreover the Samuelson-Keynes narrative of savings as leakage and investment as disconnected injection, really needs to be removed from media reporting, and they need to be recognised as connected.

  2. Mark B
    Posted November 21, 2016 at 6:15 am | Permalink

    Good morning.

    We saw property, commodity and financial asset bubbles as a result.

    And we are seeing it again ! :/

    With the election of, Donald Trump and a change to economic policy, we will see lower taxes for large corporations which may lead them to re-locate back to the USA. More investment in US infrastructure should help create jobs but, it is important that once the economy starts to move in the right direction, government spending must slowly be reduced and investors encouraged to well, invest.

    Long term, government is not the best vehicle as we have seen from failed plans of the past. They distort the market, kill off competition, fee enterprise and innovation. It also costs the end user more and denies choice.

    • forthurst
      Posted November 21, 2016 at 9:49 am | Permalink

      “we will see lower taxes for large corporations which may lead them to re-locate back to the USA.”

      US Corporations do not view the UK as a location for low cost production but rather one for corporate imperialism and proximity to their export markets; we are not Mexico. Furthermore Mrs May has promised world beatingly low levels of corporate taxation.

  3. Newmania
    Posted November 21, 2016 at 6:26 am | Permalink

    Or maybe not . The only fact is Trump won and bond markets saw inflation coming . What we have here is Redwood getting his excuse in nice and early for the fact that Brexit , by causing the currency to crash to going to bring about inflation and so interest rates will go up
    The desperate hope, for all of us who wish our neighbours and friends well, is that by blocking and delaying Brexit it will no longer be possible to hide its costs through the twin policies of low interest rates and abandoning fiscal restraint
    John and his cabal of ultras want to change the history of this country on the back of a dim witted anti this and that vote .They know that support for it is very weak and it would take only a slight visible economic perturbation to undermine the process
    That could be interest rate rises next year and as the prospect of article 5o being reversible looms the fight is very much on

    Quite why otherwise ordinary people should be so determined to hurt their fellow citizens is a subject for psychologists , Bridge Over The River Kwai syndrome , I call it

    Reply Why not stick to telling us your views. You clearly do not read or understand mine, and I am at a loss to know why you keep coming on this site if you have such a low and false opinion of my views.

    • Yudansha
      Posted November 21, 2016 at 8:44 pm | Permalink

      “Bridge Over The River Kwai syndrome”

      An officer type went doolally and sided against his countrymen on a malign foreign project – until he came to his senses, if I recall.

      • Denis Cooper
        Posted November 23, 2016 at 11:52 am | Permalink

        Correct.

    • Edward2
      Posted November 21, 2016 at 8:59 pm | Permalink

      Newmania is a lefty
      They have a very high opinion of themselves.
      They think they are always right and that any opinion other than their own are worthless.
      Their eyes are closed.
      Fortunately this is why they are being rejected by voters all over the world.

    • sm
      Posted November 21, 2016 at 11:47 pm | Permalink

      John, he has similar form on other sites.

  4. Richard1
    Posted November 21, 2016 at 7:31 am | Permalink

    Hindsight has also led meany observers to agree what a few people have said all along – that complex capital adequacy regulations with governments backstopping banks invites banks to game the system. All that is needed is a simple and clear understanding that banks will not be bailed out and much lower levels of bank balance sheet leverage (the only measure which really counts), which would happen naturally once the backstops and the regulatory edifice was removed. It is also good news that there is a fast growing fintech industry which is disinternmediating banks and will liberate society from its dependence on banks, a particular problem in the UK & Europe.

  5. margaret
    Posted November 21, 2016 at 7:36 am | Permalink

    I guess it is moderation in most things and in few areas go for it, as always ,This is the only way to create dynamism.

  6. Prigger
    Posted November 21, 2016 at 7:36 am | Permalink

    Many Fund managers nowadays shy away from airline stocks as they say they are dangerous. In regard to bank stocks they say “Well if you HAVE to buy bank stocks then buy……… as this one is more safe than the others.”
    There are few jobs where you do not pay any real penalty for complete and absolute failure. A Banker is one of them. Many times they are in fact better off by being asked to resign than if they soldiered on.There was a similar system of remuneration in Soviet Russia

  7. Lifelogic
    Posted November 21, 2016 at 7:54 am | Permalink

    Indeed the banks seem to have to comply with all sorts of daft slotting and other rules that are restricting supply of credit on sensible terms. They are often able to borrow at less than 1/15 of what their lending rates, even to extremely solid and well secured customers.

    Then again daft rules and red tape in almost every industry (and indeed in the state sector) is the norm in the UK. There is little sign that T May or Hammond will do anything about it. May even want workers & customers forced onto company boards and businesses forced into pointless gender pay reporting drivel.

    If Hammond really wants better productivity he needs to get the government out of the way, cancel HS2, Hinckly & all the green subsidies, get some real competition in banking, cancel the climate change act, move to cheap energy, move to easy hire and fire, cut and simplify taxes and have a bonfire of red tape. It is all very obvious stuff.

    We shall see on Wednesday but all the signs look dire, he looks very like another misguided Osborne, perhaps even more tedious and wrong headed.

    • Lifelogic
      Posted November 21, 2016 at 1:56 pm | Permalink

      So Theresa May is back tracking a bit on her bonkers workers and customers on boards agenda. Hopefully on gender pay reporting and quarterly reporting too. How could she ever have been so stupid as to even suggest this lefty lunacy? I suppose that is just woolly thinking geography graduates for you.

      If companies want workers on boards and they think it will help, they can appoint them already. What laws are needed, none?

      Nothing about cheaper energy in her speech either the UK will not be competitive without it, cut all the greencrap now and get fracking.

      Nothing about easy hire and fire and thus more job creation.

      She said:- “We believe in free markets. They are the means by which we spread opportunity and lift people out of poverty”.

      Well does she really? If so she can address the following areas perhaps.

      In Health where the “free at the point of rationing and incompetence” NHS kills nearly all competition and many patients too.

      In housing (where private provision is very highly taxed (often to subsidise unfair competition from social housing). Also building regulations and planning laws hugely restrict supply and push up costs.

      In wages where the dire Osborne though he know what wages to pay.

      In the media (where the BBC get a huge licence fee advantage over others competitors). This to drip the nation in its lefty, pro EU, open door immigration green crap agenda.

      In education where you cannot get a voucher to exchange and so are stuck with the limited and usually very poor state provision.

      In transport where trucks, planes and cars are hugely taxed yet buses and trains are hugely subsidies. Scrap the bonkers HS2 at least woman.

      Many other areas too, but start with these please. Or was Theresa just lying when she said it? This, after all, is the general approach of recent Tory Leaders. Cameron said he was a cast iron guarantee, EUsceptic, low tax conservative at heart and his priority in three letters was the NHS. He also said he would stay in office after a BREXIT vote and give notice the next day.

      He was clearly non of these things and did non of them.

  8. Ian Wragg
    Posted November 21, 2016 at 7:57 am | Permalink

    When you have openly political central bankers like Carnage and Yelland it’s no wonder that we’re in a mess.
    Carnage has the diametrically opposed policies to which he should be following. When the £ dropped after the Brexit vote there was absolutely no need to print any more money. Interest rates should have risen modestly and things would have normalised.
    Instead he continued following Gideons plan to destroy the post vote economy.
    Yelland now appears to be trying to shaft Donald.

  9. Nig l
    Posted November 21, 2016 at 8:04 am | Permalink

    You conveniently leave out Governments because the central banks carry out their bidding. I remember Gordon Brown crowing how their relaxed controls were contributing to liquidity and hence all that growth that turned out to be built of sand. Governments need the Banks to buy their paper to fund their deficits so how convenient that fits with the capital reserve requirement and please do not tell me that ring fencing which is costing U.K. Banks billions is not a politically forced solution plus the ludicrous amount of expensive gobbledegook that one has to read when buying any financial product.

    However over the years in my view Politicians like to concentrate on the supply side and conveniently blame it when the truth is that it is demand that is the problem and their inability to create it. I well remember Banker friends complaining that they were getting beaten up for not lending when no one was walking through the door.

    Incidents like Brexit, ok a one off but government short termism make it very difficult for corporate treasurers to sell a medium or long term view.

  10. CascadingRot
    Posted November 21, 2016 at 8:19 am | Permalink

    Well you would think it would be simple. But recessions come and go. Mr Osborne is famous for continually expecting “an inevitable recession”. Mr Phillip Hammond said only yesterday that he needs to make enough “headroom” in his plans to allow for setbacks.
    As with other businesses such as VW. It now proposes 30,000 workers being made redundant, nearly 20% of its workforce in Germany.
    Despite whole lives being utterly wrecked, marriages and relationships bombed,homes lost. A triumphalist headline reads: “New measures are projected to save VW €3.7 billion a year.” Well……………. Wunderbar!! Same kind of weird headlines for our banking system. The banks don’t need a midwife, they need an abortion, but not on the NHS

  11. E.S Tablishment
    Posted November 21, 2016 at 8:50 am | Permalink

    I read Justin Welby the Archbishop of Canterbury has just discovered Christmas.

    http://www.independent.co.uk/news/people/isis-nothing-to-do-with-islam-justin-welby-archbishop-canterbury-religion-a7427096.html

    Little sympathy can be extended for Mr Welby’s late to the Party view that atrocities and ISIS have “nothing to do with Islam”

    Free speech, years ago, would not have prevented the rise of ISIS or ISIL but would have cleared away the chaff so many of us could discuss serious matters seriously without pre-thinking of clever phrases and words as euphemisms of what needed to be said.Of course such usage automatically renders deaf many amongst us, even the very well educated with high IQ who have minds which only think along on a linear plane.

    Even now Mr Welby talks of “groups” spreading racism and hatred in the same breath as he speaks of Brexit and Mr Trump. His words, no not of God, but Mr Welby’s words, Archbishop of Canterterbury are part the greater problem

    • Ed Mahony
      Posted November 21, 2016 at 10:16 am | Permalink

      I hear what you say to a degree, but still need to be cautious.

      I mean Vlad the Impaler was a Christian King. Stalin and Pol Pot were atheists. And Hitler was a nationalistic nutcase.

      In other words, it was extremism / sociopathy / evil that was ultimately to blame. Same for ISIS.

      But i still agree with you to a degree.

      (BTW, just returned from Granada, Spain where I visited the Alhambra Palace and Gardens built by a Moorish emir in the 13th century. It is for me, the most extraordinary, the most beautiful secular building I’ve ever seen. Nothing comes close in my view. And it was built to evoke the idea of Paradise. And if anyone looking for a romantic weekend with their wife or husband, i highly recommend, but of interest to anyone who loves architecture, history and just beautiful things in general).

      • Mitchel
        Posted November 22, 2016 at 10:45 am | Permalink

        Stalin was educated in an Orthodox seminary.His biographer,Donald Rayfield,writes :-“his transition to atheism was neither abrupt nor complete.His atheism was a rebellion against God rather than a disavowal of the deity.The transition from Orthodoxy to Marxism,from the discipline of the Church to the Party is easy.Stalin went only halfway.Marxists declare man to be naturally good;all evil stems from social injustice.Stalin knew all human beings to be sinners in need of punishment and expiation.He took with him into power the deeply held conviction that the duty of the ruler was not to make his subjects happy but to prepare their souls for the next life”.In that he was not so different from the Romanov Tsars or Byzantine Emperors.Look up the principle of “caesaropapism” which runs through the Orthodox branch of Christianity.

        I don’t know why you single out Vlad the Impaler as a Christian King;if you know anything of the history of the near endless wars between the Poles,Lithuanians,Russians and other peoples of the Balkans, the Tartars and Ottomans(between the representatives of Catholicism,Orthodoxy and Islam effectively),in Eastern Europe during the period 1200-1650,you will know they were fought with barbaric intensity on all sides.Quite often the Islamic power would be in alliance with one of the Christian powers against the other sectarian Christian power.

    • Mitchel
      Posted November 21, 2016 at 10:29 am | Permalink

      ” a few years after Benedict’s…”

    • Robert Christopher
      Posted November 21, 2016 at 5:38 pm | Permalink

      The previous incumbant doesn’t improve matters either:

      Mass democracy has failed – it’s time to seek a humane alternative, by Rowan Williams
      http://www.newstatesman.com/world/2016/11/mass-democracy-has-failed-its-time-seek-humane-alternative

      • E.S Tablishment
        Posted November 21, 2016 at 7:45 pm | Permalink

        No.

      • Denis Cooper
        Posted November 22, 2016 at 9:04 am | Permalink

        I should think theocracy would be the thing, then power would lie with good people like Rowan Williams in their pulpits not the plebs in their pews.

  12. hefner
    Posted November 21, 2016 at 8:54 am | Permalink

    So, nothing on investment banks?

    • A different Simon
      Posted November 21, 2016 at 2:57 pm | Permalink

      What do you mean by “Investment Banks” ?

      Banks which make their money from fees and commissions to industry ?
      Or hedge funds with banking licenses which derive most of their earnings from trading on their own account and competing with/against customers ?

      Hopefully Mr Trump will honour his promise to reinstate Glass Steagal and reduce the systemic risk to the real economy .

      I wonder whether the proposition that private banks finance a recovery is not a fatal flaw .

      Wouldn’t it be better if the link between savings and borrowing was restored so that savers funded a recovery ?

      (of course this would require the masses to be allowed to retain a surplus of cash for saving rather than having it all appropriated by mortgage lenders).

      Don’t we also need to get the longer overdue crash out the way ASAP to purge the system of unpayable debt so the world can finally start to move forward away from 2008 ?

  13. Denis Cooper
    Posted November 21, 2016 at 9:11 am | Permalink

    I don’t necessarily agree that QE “has helped the rich with financial assets more than the rest of the population”; at least not in the UK, where it was started primarily to help the Labour government to pay its bills, including its pension and welfare bills, in the run-up to the 2010 general election.

    In the US the new money was initially used to buy private assets rather than government bonds, and then that criticism is more valid. But without QE the UK government would probably have found itself in a similar position to the Greek government; no longer able to borrow enough to cover its huge budget deficit at any feasible interest rates, it would have run out of money to make all the payments due from it in full and on time.

    • acorn
      Posted November 22, 2016 at 6:52 pm | Permalink

      Sorry Denis but you are talking total, utter, complete nonsense. The UK Treasury never runs out of its own currency, IT IS THE CURRENCY ISSUER. There is no bill presented to the UK Treasury, in Pounds Sterling, that it can’t pay. The only place you can get new Pounds Sterling is from the UK Treasury, NOT the central bank.

      The UK Treasury does not have to borrow its own currency from anybody. Issuing Gilts has nothing to do with financing the government spending, they are merely “risk free” savings certificates for pension and insurance companies. The private sector is totally dependent on the public sector for a “risk free” Pound Sterling investment product.

      Taxation does not fund government spending. All tax payments disappear back into thin air when they get back to the currency issuer, the Treasury. Every Pound the government spends each day, is brand new, every day; created out of thin air.

      The so called “national debt” is all the Treasury spending “out of thin air”, that it has not yet got back in taxes, because the private sector, THE CURRENCY USERS, are SAVING it.

      • Denis Cooper
        Posted November 23, 2016 at 8:50 am | Permalink

        We’ve been over this so many times that it’s getting a bit boring. The Treasury could be the currency issuer, and it was when it was issuing Bradbury pounds, but it could be again in the future, but at present the Bank of England issues the banknotes we use as our everyday currency in the UK, and which are in fact the legal tender in the UK. That is what it says on the notes, unlike the Bradbury notes which said they were issued by the Treasury. The Treasury can issue unlimited volumes of bonds, gilts, but they will not be accepted at the supermarket checkout and so are not a suitable medium for the government to make its numerous payments to the population; the Treasury needs to exchange them for money to pay its bills, and when it seemed that private investors were becoming reluctant to make that exchange the Bank of England was called in a captive investor.

  14. a-tracy
    Posted November 21, 2016 at 9:15 am | Permalink

    “I argued for faster and more effective measures to get RBS and HBOS lending more again”.

    The problem is who will the lenders be?
    Many small businesses during this time were really put upon by their bank, calls every day to ask how much you’d be depositing! constant haranguing over quarterly reports, becoming monthly reports, pulling overdrafts with a months notice or insisting on share holdings and a bank representative on the board. Who wants to repeat the risk and harassment of that again?
    In my opinion, as a parent and employer our schools, colleges and many Universities have taught young people to be too risk averse.

  15. Bert Young
    Posted November 21, 2016 at 9:37 am | Permalink

    There are Central Banks and there are Bankers ; both have a poor reputation as far as their results and practices are concerned . There is no doubt in the public’s mind that much of what they do is concerned with lining their own pockets ; savers have always come off the worse from their activities . Add to this malaise is their link to politics and the resulting short term view in managing economics and money .

    The City of London has a major influence on our balance of payments and is a magnet to the financial world . Unfortunately it is no longer the place where honesty and trust are a feature of its workers ; exploitation and greed have overtaken its previous moral values . I don’t write as an outside observer ; in the late 60s , 70s and 80s I -and my organisation , were involved on many occasions in its top management and organisation and witnessed some of the changes that took place . One of the major mistakes was the move of the Domestic Bankers into the Merchanting arena ; this resulted in a huge shift that caused some major catastrophes we all witnessed and suffered from . Mergers and acquisitions have since added to the overall problem .

  16. acorn
    Posted November 21, 2016 at 9:43 am | Permalink

    It was not all excessive bank regulation that stopped cash (government money) and credit (commercial bank money) expansion. The latter’s problem was finding customers who could pay back the loans from uncertain future income streams. Eight years after the GFC, every High Street is full of retailers discounting left, right and centre.

    Mr Congdon is a “Quantity Theory of Money” proponent. He still believes that banks lend reserves which via the “money multiplier” increase the “money supply” and directly create inflation”.

    BoE monetary policy was nowhere near as effective as the unlimited spending power of the Treasury. Have a look at PSA1 sheet in Public Sector Accounts. http://www.ons.gov.uk/file?uri=/economy/governmentpublicsectorandtaxes/publicsectorfinance/datasets/publicsectorfinancesappendixatables110/current/appendixatables110finalseptembercorrected.xls

    As far as the Treasury was concerned, the banks blew up in 2007. The non-bank economy followed a year later. At its peak, Treasury net debt was 149.5% of GDP at £2,312 billion, only £935 billion of that was for the rapidly deteriorating non-bank economy. Nine years later net debt including banks is down to £1,927 billion, while non bank portion of that debt is £1,638.

  17. margaret
    Posted November 21, 2016 at 10:11 am | Permalink

    John in reference to a-tracy’s comments what do you think about lending projects as in funding circle.

  18. Evan
    Posted November 21, 2016 at 10:28 am | Permalink

    Regulation as we know it is the problem, not the solution. Not just in banking and financial services.

  19. Denis Cooper
    Posted November 21, 2016 at 10:33 am | Permalink

    For the present I accept that Theresa May is sincere in her expressed determination to get us out of the EU, and on the best possible terms, but I think it’s time she had a word with Philip Hammond about his negativity and his habit of providing anti-Brexit mass media outlets with headlines such as this:

    http://news.sky.com/story/chancellor-warns-brexit-uncertainty-leaves-uk-facing-eye-watering-debt-10664912

    “Chancellor warns Brexit uncertainty leaves UK facing ‘eye-watering’ debt”

    I’m looking at the table on page 36 of this report issued last week:

    http://researchbriefings.parliament.uk/ResearchBriefing/Summary/CBP-7790#fullreport

    and I see public sector net debt for 2015/16 shown as £1603 billion, 84% of GDP.

    So does Philip Hammond reckon that this pre-referendum level of public debt was fine, and not in any way “eye-watering”? And that the previously projected addition of another £137 billion over the next five years would also not make it “eye-watering”?

    But if the worst predictions come true, and £100 billion more is added to the previously projected peak of about £1740 billion, because it may take the government a year longer to balance its books, then that will suddenly make it “eye-watering” debt?

    Is there some kind of threshold, that public debt of £1740 billion would not be enough to make our eyes water, but £1840 billion would definitely have that effect?

    And the blame for that would be our vote to leave the EU, against his personal wishes?

  20. Trojan
    Posted November 21, 2016 at 10:45 am | Permalink

    Mrs May has just finished speaking to the CBI . Yes if she keeps repeating the message she may knock it into them. ( Interesting Facebook is increasing its UK staff by 50% in 2017, she noted ).
    Sky News then immediately flashed via video link with an economist, the former Greek Finance Minister, Yanis Varoufakis so loved by Corbynistas. You know better than a guess, what he said. No need to repeat it. He is one of two economists of Greek origin wheeled out by our media regularly. Both Remainers. Both entertained as a first option for comment by the media.
    Are there no proper economists in Greece?

  21. Aatif Ahmad
    Posted November 21, 2016 at 10:49 am | Permalink

    There is no bubble in equities (definitely not emerging market, which are at their lowest and most likely not in developed market equities). Yes, valuations are high but nowhere near the bubble territory of late 1990s or late 1920s. There is a ‘bubble’ in bonds, in the sense that rates are very low (1-2%, compared to 15% in early 1980s), but inflation has been quite low (0-3%, compared to 20% in the early 1980s) and the supply of savings exceeds investment (fixed asset investment has been on a secular decline), hence the lowering of interest rates. This has also happened in Japan and is partly explained by aging.
    Interest rates have been falling since the early 1980s, i.e. way before QE.

    Why is the Redwood portfolio not wholly cash, if bonds and equities are in a bubble?

  22. Antisthenes
    Posted November 21, 2016 at 10:56 am | Permalink

    We have witnessed the blatant politicisation of many supposedly independent US government institutions under Obama the FED being one of them. Not that they have not always been but not to the considerable degree that he managed to achieve. The obvious danger of all government functions and functionaries is that they will tamper with the system to aid the political party they favour. As left wing parties offer the largest and best bribes and have the most attractive ideology for government employees and other self serving groups(always to be found in monopoly environments which government institutions all inhabit) it is them that usually benefit the most.

    The BoE is one of many UK government institutions whose independence is illusionary. The heads of them are political appointees and the employees have vested interests that I adumbrated above. The BoE is wedded to Keynesian and progressive theory and doctrine. A sure recipe for boom and bust but no less so if it was different theories and doctrines. Perhaps the current one is the most pernicious.

    We bewail the debilitating symptoms arising from having a government that relies on experts who have insufficient and non real time information and are not impartial enough to make the decisions they do. A government that has so much power and control that enables them to interfere in all the workings of our society with frequent damaging consequences. Yet we do nothing to address those multiple problems(the root causes of much of societies ills) instead we let the politicians and political parties dictate the agenda.

    The agenda should be what is in the best interests of the citizens of the nation state and that would be to let the collective actions of those citizens as they interact with each other setting the level of demand and the means of supply dictate government policies and practices. We have designed and built a system to enable us to do that it is called the market place which is proven to work efficiently. Only not doing so when government or one of it’s agencies interferes with it in the belief it knows better or to manipulate it for it’s benefit. The latter becoming more and more widespread. Governments role is to police us not control us we perfectly capable of looking after ourselves but sometimes not too honestly. Benevolent not dictatorial laws, rules and regulations is governments role and little else.

    • Antisthenes
      Posted November 21, 2016 at 11:00 am | Permalink

      “manipulate it for it’s benefit” should read “manipulate it for it’s own benefit”.

  23. TurningPoint
    Posted November 21, 2016 at 11:03 am | Permalink

    Economists and various political/economic pundits get caught with their trousers down. The 2008 crash happened. They then turn round and make excuses or explanations for unforeseen happenings.
    June 23rd/June 24th is something these people cannot hide. An exact pinpoint. Utterly foreseen whatever the outcome. They went from an almost universal opinion on the 23rd to be proved totally wrong within 24 hours. No excuses. All the facts were there. The Great depression or recession did not “immediately follow a Leave vote”. No point asking them as Mr Carswell MP loved asking Mr Cameron “What went wrong? What went wrong was they used inadequate models and re-wrote them to avoid plagiarism and spouted it out to all who would hear as the accepted wisdom.We need economists who can actually think for themselves.

  24. Denis Cooper
    Posted November 21, 2016 at 11:20 am | Permalink

    I see in this other anti-Brexit media outlet:

    http://uk.businessinsider.com/scotland-act-2016-article-50-brexit-2016-11

    “The Scottish parliament may have the legal right to block Article 50 entirely”

    On any plain reading of the 1998 and 2016 Scotland Acts the (publicly funded) counsel for the Scottish government should not have a leg to stand on, but that doesn’t mean to say that the judges on the Supreme Court will come to that decision.

    I think that the government must see this appeal through to the bitter end, otherwise dangerous precedents may enter UK case law unchallenged and lawyers being lawyers that would be sure to come back to bite in the future.

    However I also think that the government should not wait upon the verdict of the Supreme Court to introduce a short Bill confirming that it has parliamentary approval to serve the Article 50 TEU notice that the UK intends to leave the EU.

    To anticipate claims from Remoaners that anything less than an Act cannot touch the European Communities Act 1972 it will have to be an Act passed by both Houses and given Royal Assent, not just a motion passed by the Commons or by both Houses; and so that the judges cannot pretend that the intention of Parliament is still not clear it should expressly say “notwithstanding the European Communities Act 1972”; and to deprive those judges of any jurisdiction and prevent them declaring that this short Act is still not enough, and it should really be another, much longer and comprehensive, Act it should also say “In accordance with Article IX of the Bill of Rights 1688 no provision of this Act may be questioned in any court in the United Kingdom on any ground whatever”; and to block planned attempts to involve foreign courts it should also add “and nor may any question relating to this Act be referred to any court outside the United Kingdom”.

  25. ian
    Posted November 21, 2016 at 11:36 am | Permalink

    Nope, people and parties do, When the system cleared, they nearly cleared the system in 2009 but changed their minds, in other words they lost their bottle, will it clear of cos it will clear, just a case of when, 2018, 2021 to 2023, 2029 to 2031, it has to be a 75 to 90 percent clearance from the top, 10 to 61.8 % will not do.

  26. English Pensioner
    Posted November 21, 2016 at 11:39 am | Permalink

    I still struggle to try to understand the purpose of Central Banks and what they do. First they claim our Banks are lending too much and that this amongst other things led to the downfall of certain banks. They then bail out these banks, tell the banks tighten their rules to prevent this happening again and then follow this instruction by telling them that they should be lending more.

    The BoE reduces interest rates to next to nothing so it is no longer worth saving, so many decide they might as well spend and enjoy their money. Unfortunately for the country, many pensioners like ourselves, who have some savings, spend their money on taking foreign holidays or cruises on foreign owned vessels. So where do the banks raise money to lend if there are less savers?
    At the same time, whilst low interest rates might encourage borrowing, sensible borrowers consider whether they can afford to do so if rates rise and borrow little whilst the foolish ones who won’t be able to pay if rates rise cause further losses to the banks starting the whole cycle again. (As well as a political crisis when mortgages can’t be paid and families are made homeless)

    Why can’t banks be run like any other business and compete commercially on interest rates? Would we have the present low interest rates if they had to compete for money and borrowers like any other business? And if they go broke, why can’t they go broke like any other business which is incompetently managed?

    Perhaps I should try to find a guide to modern economics; what is happening now seems to bear no resemblance to the economics that I was taught at school back in the ’50s.

    • Lifelogic
      Posted November 21, 2016 at 7:08 pm | Permalink

      Indeed, what exactly is the point of central banks? The largely seems to assist governments in yet more back door taxation.

  27. FocusFogged
    Posted November 21, 2016 at 11:45 am | Permalink

    Mr Clegg MP is in the news for being part of a group campaigning for the legalisation of cannabis “so we don’t fall behind the rest of the world”. He is mixed up, confused, lost directional orientation, reason unknown.
    We are not “falling behind” the rest of the world. They have removed themselves to our backside…smoking all kinds of…..
    The delivery system of that particular narcotic is predominantly tobacco even for users who do not smoke regular cigarettes. The two complex narcotics of nicotine and cannabis when combined produce other complications and modify the behaviour of both singularly and in combination. If the excuse is that it will relieve arthritic pain in your right leg.Go pull other one. Personally,I drink beer so I have a valid reason given to police officers for sleeping in a graveyard on my way home from the pub on Saturday nights.
    It is good Mr Clegg , due to boundary changes and the little likelihood anyone of account is going to vote for him again, is seriously considering retiring before the next General Election. He needs to concentrate, perhaps dig his finger nails into the palms of his clenched fists and retire even earlier . Take smoky-joe Ken Clarke with him too.Neither of them will be missed.Neither of them will be missed.

  28. Denis Cooper
    Posted November 21, 2016 at 12:26 pm | Permalink

    Off-topic, I was interested to read here:

    http://facts4eu.org/news.shtml

    that the Italians have lost the knack of passing illegal immigrants on to other countries.

    • Anonymous
      Posted November 21, 2016 at 8:07 pm | Permalink

      I was in Northern Italy recently, the Como area and there appears to have been stop put in the bottle.

      In any case. Such is the huge flow of migrants (all young men) that a transient population will look like a permanent one to locals.

  29. Judo-style
    Posted November 21, 2016 at 12:48 pm | Permalink

    Recessions can be caused by politicians. I may stand corrected, but I believe it is statistically true that when more migrants come into our country, not only do they eventually generally increase the number-turnout for voting as with the referendum but also have the effect of getting previously non-migrant people who have seldom or never voted before… to vote.
    If the referendum turnout is repeated in the General Election then politicians who may or may not be good for the economy will be voted into power.
    I live in the north of England. I never actually campaigned at all during the Referendum campaign period. I knew, as if by instinct, that the campaigners for Remain would be knocking on doors and would actually induce the opposite result of their endeavours. They rattled cages of the quiet.

    Labour may very well do the same again, hopefully. The message they are now delivering on the doorsteps is in its entirety a demand the voter ignores or votes against them.

  30. Denis Cooper
    Posted November 21, 2016 at 1:08 pm | Permalink

    Where did all this “cliff edge” nonsense originate?

    Let’s assume that common sense and financial self-interest will ultimately prevail when it comes to the negotiations on our withdrawal from the EU, if that ever happens.

    OK, so I’m aware that at present virtually every continental politician who has anything to say on the matter comes across as a stupid, spiteful and thoroughly untrustworthy fanatic, not somebody who you would ever like to help you govern your country, but let’s assume that when it comes down to it all the sabre rattling, the ranting, the expressed determination to punish us for trying to escape from their prison camp, will quietly come to an end and be replaced by quiet and reasonable argument.

    Perhaps the new American President will even help to bring that about, as he does not share the dislike of the UK shown by the present President.

    Who will then want a “cliff edge”, that is a legal or practical hiatus leading to a damaging interruption of the existing trade between the UK and its neighbours?

    Nobody, and the only question we have to ask is about the nature of the “transitional Brexit deal” that Theresa May now says she wants:

    http://www.telegraph.co.uk/news/2016/11/21/theresa-may-cbi-corporation-tax-brexit-live/

    If she wants to perpetuate the harmful uncertainty then she will say that we should try to get some kind of agreement that we can stay in the European Economic Area, just as an interim measure, but with no clarity for business or anybody else about when or how or even if that supposedly “transitional” state will come to an end and we will move on to completely free ourselves from EU control.

    On the other hand, if she wants to provide certainty she will seek an agreement on trade and relevant issues which will be the final, or at least the long term, agreement, but with carefully defined “transitional” provisions written into the treaty.

    There would be nothing special about writing transitional provisions into the withdrawal treaty; on the contrary, it is a commonplace device, which meant for example than when the EEC was first established by this treaty in 1957:

    http://aei.pitt.edu/37139/1/EEC_Treaty_1957.pdf

    everybody knew that:

    “The common market shall be progressively established during a transitional period of twelve years.”

    and

    “This transitional period shall be divided into three stages of four years each; the length of each stage may be altered in accordance with the provisions set out below … ”

    and so forth.

    Yes, there was still some uncertainty, because:

    “Transition from the first to the second stage shall be conditional upon a finding that the objectives specifically laid down in this Treaty for the first stage have in fact been attained in substance … ”

    but much less uncertainty than having a treaty which would run for an unspecified time with a vague intention of going further in another treaty some years later, an intention which might or might not be realised.

  31. Adam
    Posted November 21, 2016 at 1:12 pm | Permalink

    Theresa May wants to invest money in science and technology. Who would have thought she would be such a great leader of the country? Not me.
    Placing our economy at the heart of the biotech revolutions to come would be the perfect way to strengthen our society for centuries to come. Policies like that may actually make Brexit work. We need to be able to pay our debts without relying on the imf.

  32. TraineeTrump
    Posted November 21, 2016 at 1:32 pm | Permalink

    A younger Trump. Fast talking. Detailed analysis speaking to his peers and the House Budget Committee. Shock and Awe. Few in the Labour Party could debate with him, if any.

    https://www.c-span.org/video/?c4623892/donald-trump-testifies-house-budget-hearing-taxes-credit-availability-us-economic-recovery

  33. Andy
    Posted November 21, 2016 at 2:30 pm | Permalink

    I think all the Central Banks have created a terrible mess and there will be a very bad reckoning at some point. I just don’t get this ‘negative interest rate’ idea as all it seems to be doing is destroying the financial system. We need to get back to sanity, but how this can be done without causing the whole thing to implode God alone knows.

  34. Jack
    Posted November 21, 2016 at 2:39 pm | Permalink

    Do you really still believe that lower rates are “stimulus”? It’s obvious that they’re not, and due to the way the term structure of rates mimics prices, they actively keep cost pressures down, meaning lower inflation than when rates are higher!

    What we need is a permanent zero rate policy at the BoE. Set up a separate national savings policy if you want to help those who previously would earn free interest, but the current system does not work and needs major changes to ensure we always have full employment and price stability.

  35. ian
    Posted November 21, 2016 at 3:50 pm | Permalink

    Big business and May should be a good laugh, going on for years to come, big business will bankrupt the people but cannot really say that because its already happened, anybody who puts companies and business above the country and people, is a fool.

    • Sandmartin
      Posted November 21, 2016 at 8:03 pm | Permalink

      Many who can keep their eyes open after returning home from work, bathing, taking the dog out, dining, helping the kids with homework have much time for the CBI audience who seem to have all the time and wakefulness in the world to listen to what they should already know from Mrs May. The business leaders there should be given useful work to do as they are obviously bored.
      They could go around asking if people wish their dogs to be walked and earn an honest pound.

  36. Brexitnow
    Posted November 21, 2016 at 4:02 pm | Permalink

    Sounds like Theresa May is thinking of a “transitional route” to leaving her Premiership, like at the next General Election being thrown out of office

  37. ian
    Posted November 21, 2016 at 6:13 pm | Permalink

    Gain another independent MEP today, well you never know which way they will go.

    • E.S Tablishment
      Posted November 21, 2016 at 7:57 pm | Permalink

      UKIP is very unlikely to be a realistic alternative to any Party in the next General Election. Had they all not stabbed Farage in the back, they would have been in an unassailable position post Referendum to actually enter Parliament big-style.

      But there is a clearing in the political clouds. An opportunity for a breakaway from the Labour Party. Certainly Mr Corbyn’s crew with its anti- this anti-that catering to each garden hedgehog’s bellyaching about slug pellets is useless as few of those pricky creatures are bothered about voting for anyone at all.

  38. OneWhoreads
    Posted November 21, 2016 at 10:18 pm | Permalink

    My internet search history includes viewing Labour Party and LibDems websites. I have Election leaflets from these extreme organisations still in my home.
    I feel so ashamed.

  39. Mick
    Posted November 21, 2016 at 10:28 pm | Permalink

    Off topic, just watched the BBC repeating the murder of Mrs Cox as sad as it was, and would you believe it the biased BBC couldn’t help but to get a statement in that it is was close to the eu referendum , I’ve news for you BBC we knew it was close to the referendum but WE don’t assume it was related, we are not idiots, well apart from the millions we have to pay in license fees, the sooner I don’t have to fund the eu /lefty lovves at the BBC cannot come sooner enough

  40. One photographs
    Posted November 21, 2016 at 10:50 pm | Permalink

    True to our British obsession with the weather The Times, The Guardian, The Daily Telegraph ( all tomorrow’ editions ), and Sky News and the BBC all day and tonight feature nation-wide flooding and rainfall using the same 75 yard-long stretch of road of one street in Bristol South showing 10 cars half submerged.
    There’s economy for you.
    Capitalism gives you choice.

  41. anon
    Posted November 22, 2016 at 11:06 pm | Permalink

    HMG allow only large private organizations to create government backed fiat money out of nothing , which costs nothing and allow them to lend it to some for a profit or lose it or otherwise misdirect it.

    What could go wrong with fallible humans in control.

    If private banks want to create money , they should create their own branded non government backed e-coin, which could still be regulated & insured. Those holding the specific e-coin would price it accordingly. No need for bailouts.

    Just ensure proper competition.

    Perhaps a tax should be imposed on the creation of money at the point of creation as opposed to the lending (real worked for) deposited funds? This tax could be used to police them.

    Or just centrally “create money” to an agreed plan & spend it, simplify or cut earned income taxes. Then tax it back out to prevent inflation. Its transparent a well.

    Oh & why penalize saving by ridiculous means test & interest rate assumptions. They should be based on the risk free rate of interest. (Which is probably zero).

  • About John Redwood


    John Redwood won a free place at Kent College, Canterbury, and graduated from Magdalen College Oxford. He is a Distinguished fellow of All Souls, Oxford. A businessman by background, he has set up an investment management business, was both executive and non executive chairman of a quoted industrial PLC, and chaired a manufacturing company with factories in Birmingham, Chicago, India and China. He is the MP for Wokingham, first elected in 1987.

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