The Fed eases policy

We are living through a world manufacturing recession. The Fed, Bank of England, Bank of China and the European Central Bank all tightened policy too much in the second half of last year. They spooked the markets and hit borrowing for investment. Several governments, led by the UK, hit their car markets hard with higher taxes, fewer car loans and an attack on diesels.

The Fed has now changed policy. It has ended its rate rises and slashed its Quantitative tightening programme. It has now announced a rethink of its whole approach to rate setting and balance sheet management.The ECB has been slow to respond, ending its Quantitative easing just in time for the industrial collapse. The Bank of China has set out new ways of getting credit into new sectors and ventures to offset the slowdown its balance sheet clean up of commercial banks has triggered. Only the Bank of England has failed to respond despite tightening substantially with its advice to reduce car loans and mortgages, and two rate rises from the low.

We should avoid a global advanced country general recession. Inflation remains very subdued with plenty of spare capacity and competitive forces. The Bank of England should be more attentive to the state of the real economy and get more into line with action being taken to avoid a downturn. The UK needs to end its attack on the car industry.


  1. Mark B
    April 12, 2019

    Good morning

    The market is indeed beginning to slow. But I think this is due to other policies our government is taking.

    The UK tax rates are too high and so to is our borrowing. This means that the government is spending too much and we all know where some of these savings can be made. We have all pretty much done this to death here.

    We are clearly heading for a self induced recession. Not a particularly big or long one but one at possibly the worst time. With our kind host leader determined to destroy his party and democracy, the last thing we want is an economic slowdown and Labour surging in the polls.

    We are standing in an economic and political cliff edge.

  2. Adam
    April 12, 2019

    Remove Mark Carney & replace him with someone sensible.

  3. Ian wragg
    April 12, 2019

    We have to cause a recession because of Brexit uncertainty.
    If we sign the WA all will be sunny and bright or so Mays narrative goes.

  4. oldtimer
    April 12, 2019

    The other side of this coin has been the inexorable rise in global debt obligations of governments, businesses and consumers which has resulted from QE over the past several years. A flood of easy money has had consequences. It is also evident that some markets for goods are at or close to saturation points. Mobile phones and cars are obvious examples. New or better products driven by technological advances seems a better way forward than one driven by yet easier credit. That said the UK’s attack on the car, via ill conceived taxes and regulation has damaged the industry. But that is par for the course for UK governments both past and present.

  5. Stephen O
    April 12, 2019

    Are the Bank of England’s actions due to its uncertainty over the impact of Brexit? Are the repeated and prolonged delays causing it to keep money tight so it can loosen it later, but the delays have prolonged this tightness?

    1. acorn
      April 12, 2019

      The global slowdown has little to do with the Central Bank in countries that issue their own currency. The problem is in the Treasuries of those countries. The neoliberal fad for reducing Treasury budget deficits results in less buying power in households, the economy slows down; unless, those households spend their savings and/or increase their borrowing. Which is exactly what is happening in the UK now.

      The fundamental is that a country’s Treasury, that issues its own currency, can never go broke in that currency. It does not borrow its own currency from anybody. Government Bonds are savings certificates it does not have to issue; they do not fund government spending. It is the monopoly supplier of that currency; you can’t get it from anywhere else.

      Government can spend its currency without constraint, it will get it all back in time with Taxes. Except it has competition in getting its own money back, savings and imported goods and services.

      Savings don’t move so don’t get taxed unless they do move or create interest. Imports mean we export the currency to foreigners, they either swap it for another currency; or, by another prime property in London and leave it empty to save the hassle of having pain-in-the-arse tenants.

      1. acorn
        April 12, 2019

        I will be interested in replies to my line above “Government can spend its currency without constraint”. Which is technically true: but in reality, it can’t spend so much as to exhaust capacity to produce in any particular economic sector or sub-sector that creates hyper-inflation.

        1. anon
          April 13, 2019

          Confidence is needed that its purchasing power is relatively stable to hold as a) a transaction currency b) a temporary store of value?

          HMG and our establishment have now reduced that confidence in our governance to one of a banana republic where democracy doesnt not count.

          Individuals will make choices elsewhere as they can & must.

          Destroying confidence in the national state to encourage sublimation into a EU superstate would be called what?

  6. Sir Joe Soap
    April 12, 2019

    You think the not-independent Bank will agree with this? Hammond is quite happy to run down the car industry then blame his not-Brexit for that.

    We’re all waiting for a not-Conservative government before any kind of positive action is taken against the nots.

    As the saying went “Sorry mate, all the best peas went to Farage’s”

  7. formula57
    April 12, 2019

    The Fed’s actions or its pronouncements at least seem heavily influenced by President Trump’s criticism of it. So much for the doubtful concept of central bank independence. The Bank has nothing to fear though for Chancellor Hammond has nothing to say.

  8. Mike Wilson
    April 12, 2019

    All I can say is No! No! No!

    Your answer to everything is cheap borrowing to fund ever increasing consumption and consumerism. It is not sustainable. Debt, debt and more debt seems to be your answer to every problem.

    We need to concentrate on clean, renewable energy. Plenty of ‘green crap’. Sustainable and self sufficient food production. The biggest threat to all our futures is the relentless increase in global population. We need to participate in global efforts to give everyone on the planet a decent standard of living – countering the age-old imperative of having ‘loads of kids so we can be looked after when we are old’ still prevalent in the third world.

    The last thing we need is endless cheap credit to buy a new car every two years.

    You want to borrow more money? Do it. And build 10 new nuclear power stations and put in a proper charging infrastructure for electric cars. There is lots to be done by government. Relying on cheap credit to get people to consume tat is a cop out. I thought you were a conservative. I thought you wanted people to save money and not rely on the state. Not easy when you also want them up to their ears in debt.

    1. anon
      April 13, 2019

      Please not nuclear.
      Its a very expensive subsidy to the EU(France) and binds us further into the web of control and deceit. It also leaves the problem of nuclear waste.

      Renewable wind power is far cheaper . Used with storage and grid infrastructure power lines to distribute the power it is a solution. Existing power stations should remain as backup for a period and then closed if clean backup can carry the burden.

      Note the EU is not in favor of capacity payments for backup power from fossil fuel plants. So each project should ensure it provides its own backup. (Nuclear requires backup more often than most assume.)

      We should encourage overnight power consumption

      Power should be driven to the marginal cost of the fuel (wind is zero) and associated overheads.(State fiat has low costs, see low interest rates)

  9. Hope
    April 12, 2019

    No deal preparations stopped immediately we are told! No vote or debate on the SI today for the extension until 31 October! More a dictatorship.

    Sneaking under the radar, Tory government now still in pursuit of wrecking the institution of marriage. Cameron introduced gay marriage against the public will. Gauke now brining in quick divorces against overwhelming opposition in consultation and against evidence in the US it increased divorce by upmto 80 percent. Hinds telling parents it is for teachers not them to teach infants about LGBT relationships! There is no way I would let my children ever be brainwashed in relation to values and morals by the state this left wing new Labour Tory government. It already has May’s snooper charter, EU arrest warrant and now May’s suppression of social media with it impact on the press. Un immigration pact banning criticism of immigration! Tory party my arse. Intrusive, over regulating, over taxed, EU controlled zealots.

  10. Peter Wood
    April 12, 2019

    Sir John,

    Still no plan to rid of Mrs May and leave the EU then……

  11. MickN
    April 12, 2019

    You sir will make a fine chancellor should a vacancy arise.

  12. Ian Wilson
    April 12, 2019

    Absolutely, and stop the assault on diesel, the harm from which is probably grossly exaggerated. As petrol is more explosive than diesel the substitution will mean more people being burned to death in accidents – remember the Hagley School minibus tragedy. The numbers may be small but it’s a singularly nasty way to die.

  13. Dame Rita Webb
    April 12, 2019

    Since 2008 every £1 of incremental GDP has been ‘bought’ with around £5 of borrowing, you can get similar figures for other advanced Western economies too. It is inevitable there be another re-run of 2007/8 presumably with a greater magnitude too.

  14. Fed up with the bull
    April 12, 2019

    couldn’t agree more with your last sentence. It was reported that newer diesel cars emit a lot less harmful emissions than older ones. What a surprise!! NOT. Just because our car was over a certain price means we have to pay a higher road tax. WHY? The chancellor has it all around the wrong way. If he wants to improve air quality then he needs to get older cars off the road and encourage the purchase of new cars. We have already paid tax on our car when we bought it yet we are being penalised for wanting to drive a decent car. Sums up this government and probably all parties at the moment.

  15. Lifelogic
    April 12, 2019

    Indeed government’s misguided red tape, restricting bank lending for property and vehicles is doing huge economic damage. As of course are the highest and most complex taxes for nearly 70 years from Hammond. Also the fact that the hopeless, robotic, liar and electoral liability Theresa May seems absolutely determined to give us Corbyn and Venezuela Mk. 2.

    May regrets that she has been unable to persuade parliament to buy its way into servitude with her £39 billion straightjacket treaty. Let us hope she can be removed before she ever does so. Allister Heath was surely spot on yesterday day:- Mrs May’s knack for repelling voters risks electoral oblivion for the Conservatives. The PM has angered every demographic, leaving her with poll ratings nearly as dire as John Major’s

    (And this even where the alternative is the dire confiscatory Corbyn and a trip to Venezuella.)

  16. Narrow Shoulders
    April 12, 2019

    If indeed Britain leaving the EU will accelerate the global downturn as Ms Legarde of the IMF states, why won’t the EU discuss a free trade deal with us before we become a third country? And why is the IMF and OECD not publishing forecasts that show increased trade if a free trade agreement is agreed? The pressure should be for an agreement not for our subjugation.

    An agreement would provide the confidence to central and retail banks to loosen credit further and might correct the inversion of short term bond yields which often cause recession.

  17. Alastair Harris
    April 12, 2019

    And also it’s obsession with petty pointless regulation. The drip drip is becoming a flow.

  18. Al
    April 12, 2019

    It isn’t simply the car industry that is affected. The government could quite easily boost small business sectors by streamlining regulation e.g. a delay or postponement of ‘making tax digital’ would certainly help smaller forms and non-profits and wouldn’t cost it anything. A change to Universal Credit to remove the civil service’s interpretation that actually penalises the self-employed would also help.

    1. Dan Rushworth
      April 12, 2019

      Universal credit certainly does penalise the self employed. It doesn’t help anyone wanting to start a business. I would expect the system from a labour gov, but not a conservative free enterprise ideological party. Oh, but sorry, this government isn’t one of those,is it.

  19. Bryan Harris
    April 12, 2019

    While we have a socialist inspired chancellor aligning monetary policy with the EU we are never going to see a properly balanced economy.

    He is far too keen on taxing us into submission over Brexit to be a good white shirt wearing politician…

    His policies are harming not just business, is certainly prejudiced in certain areas, but making the average family much worse off – It’s time for a political earthquake to change this. There should be no room for dogma in politics.

    1. agricola
      April 12, 2019

      But what else is there but dlgma from our abysmal lot. Very little original thinking between them. They are scared of their own shadows and terrified of losing the political direction the EU gives them.

  20. Roy Grainger
    April 12, 2019

    I see the government has abandoned no deal planning so that saves Hammond a bit of money. Presumably they’ll start it again in the first week of November and he’ll tell us no deal will be a catastrophe because we’re not ready.

    Up to this point I’ve been wary of Remainiac calls for a Royal Commission Investigation into Brexit because they normally add they want Farage & Boris to be put in jail as a result, but now I’d like to see one just to see the full extent of Hammond’s duplicity.

    1. ian wragg
      April 12, 2019

      The only place Farage is going is into Westminster, the Brexit Party is already polling at 11% mainly but not entirely at the expense of the Tories.
      We need a Tory wipe out at the local elections and at the EU elections.
      I for one will never vote Tory again after the betrayal by May who obviously takes her orders from Berlin.

  21. Lifelogic
    April 12, 2019

    A letter in the Telegraph today reminds people of the promises made by Cameron (not sure if they were Cast Iron Promises this time) in his Chatham House referendum announcement. He said “ultimately it will be the judgment of the British people in the referendum that I promised and that ‘I’ will deliver. You will have to judge what is best for you and your family, for your children and grandchildren, for our country, for our future. It will be your decision whether to remain in the EU on the basis of the reforms we secure, or whether we leave. Your decision. Nobody else’s. Not politicians’. Not Parliament’s. Not lobby groups’. Not mine. Just you. You, the British people, will decide. And it will be the final decision.”

    Cameron instead of delivering (as he had solemnly promised to do) he just abandoned ship like a pathetic petulant child given an unwanted birthday present. Lumbering the UK with the dire Theresa May. Is it any wonder so many MPs are now considered to be traitors, quislings and betrayers by such a huge proportion of the electorate. It turn out it was not our decision at all, but a handful of fraudulent MPs (plus bureaucrats) nearly all elected to parliament on manifestos promising faithfully to deliver Brexit.

  22. Andy
    April 12, 2019

    “The UK needs to end its attack on the car industry.”

    Easy. Cancel Brexit.

    1. chris maughan
      April 12, 2019


      You posts become ever more bizarre, deranged and myopic obsessive.

    2. Jiminyjim
      April 12, 2019

      Even by your very low standards, Andy, this is pathetic. Why bother even typing such drivel?

      1. Andy
        April 12, 2019

        The UK car industry has made repeatedly clear that it sees Brexit as its biggest threat.

        Europe-wide diesel is a bigger issue. But not here.

        I understand you all live in a parallel universe where your Brexit is not a complete and utter car crash but most of us are fortunate to not be quite so delusional.

        To be honest I personally don’t much car. I don’t work in the car industry, I don’t live in one of the grim towns which rely on it – I can afford to import anyway, whatever happens.

        I am just doing my bit for those of you who are less fortunate. But if you work in the car industry and voted leave then – bless, never mind.

        1. Edward2
          April 12, 2019

          I’ve never read anyone who is more out of touch with the current situation in the UK car industry.
          Just stop writing Andy.
          It is embarrassing.

    3. anon
      April 13, 2019

      We are still in the EU.

      The EU blinks at every deadline.
      It extends and pretends its because its puppets in the UK asked no begged for it. Using Henry the VIII style powers to keep us in.

      On a clean exit Way to Go deal (WTO) or variant an interim “Trade deal will be done” in the case of the EU that means decades.

  23. Kevin
    April 12, 2019

    I hope you will understand the desire to write off-topic until democracy is restored. No sooner has the Easter recess begun than we have reports that government no-deal planning has been shelved (e.g. the Daily Telegraph, via the BBC newspaper review). Perhaps this will put paid to any idea of postponing a change in leadership until after the May elections.

    I also hope that, this time, some foresight can be exercised in selecting a new leader. No-one who has ever voted for the EU’s Withdrawal Agreement should be among the pool of candidates.

  24. Lifelogic
    April 12, 2019

    Still some good news perhaps. It seems after a review they might finally stop pissing tax payers money down the drain of HS2. Let us hope they do, even if it is rather late how much damage has been done and money been wasted so far?

    1. Andy
      April 12, 2019

      HS2 is a wonderful thing. It’ll be finished one day and then all the naysayers will be whining about HS3, HS4 and HS5.

  25. Abendrot
    April 12, 2019

    Good morning Sir John,

    What you say about the BoE is correct, but Hammond has cloth ears and the BoE appears committed to big government control, the very antithesis of what I thought the Conservative Party stood for.

    Now that Jeremy Corbyn has been made respectable by Kim Ill May, I note that the polls are moving substantially against the Party. It might be the right time to address those lazy businesses in the CBI who hope to maintain their comfortable unchallenged existences within the EU by asking them to answer as to who or what would do more damage to their businesses; a rampant Jeremy Corbyn or an EU exit on WTO rules?

    The PM must go at the earliest opportunity for the sake of the country, the Party, and our sanity. There is a petition just started to change the leadership challenge interval; please consider signing it if you are a member of the Party. It can be found here:

  26. ferdinand
    April 12, 2019

    The attack on the car industry from all quarters was based on the false assumption that CO2 was dangerous greenhouse gas. We now know that it isn’t but are now faced with justifiable anti pollution legislation. We cannot have all electric cars in the next ten years as there is not enough electricity capacity. Better batteries will have little effect on the total. If the car industry was allowed to get on with its job the situation would soon improve but the green lobby still has an insupportable grip.

  27. Steve Reay
    April 12, 2019

    I believe our country has had a least 9 years of growth but interest rates languish behind the inflation curve. Interest rates are being held back by below inflaltion wage increases. If we truly had a healthy economy then interest rates would have been mormalise. I generally believe if rates were normalised wage increase demands would therefore increase to.

  28. oldwulf
    April 12, 2019

    Some might think that Mr Carney is looking to create a problem which he can then blame on Brexit – so he can say “I told you so”.

  29. fredH
    April 12, 2019

    The banks are correct to tighten their belts, all of this borrowing for new cars is not the answer, putting ourselves into massive debt when we could be debt free, if only more people maintained and drove old bangers and got over this business of trying to keep up with the Jones lark- especially when we cannot afford it- or at least most of us cannot afford it.

  30. L Jones
    April 12, 2019

    That’s fascinating stuff, Sir John, and as usual very informative.
    But, in view of yesterday’s staggering display of hubris being on everyone’s mind, is it not displacement activity?

    Still, it’s your blog, and we’re certainly fortunate to have it.

  31. Edwardm
    April 12, 2019

    I don’t understand why our chancellor is so keen to attack the car industry, and reduce the max size of pension pots his retrospective actions against tax avoidance schemes that were accepted at the time, and to make things difficult for free lancers (whose flexibility is vital). Does he want anyone to vote for the conservative party.

  32. Everhopeful
    April 12, 2019

    Fill several million helicopters with counterfeit notes and sprinkle liberally over the world.
    But will anyone want to buy all the shoddy rubbish?
    If you think about it industrialisation has only ever been a game of “ Beggar thy neighbour” and eventually you run out of neighbours to sell to or to turn into cheap workers.
    We are all indentured by debt in a world recently made much,much less free.

  33. Alan Joyce
    April 12, 2019

    Dear Mr. Redwood,

    A further six month Brexit delay is announced and Donald Tusk says to the UK “Don’t waste this time.”

    Taking on board his advice, the UK Government immediately announces a 12 day Easter break for Parliament and cancels No-Deal planning. Delighted MP’s cheer as they pack their bags and head off for their holidays. Meanwhile, most of the country will receive a 2 day break for Easter.

    As the saying goes ‘It’s a tough life but someone’s got to do it’.

    1. miami.mode
      April 12, 2019

      AJ. Parliament ostensibly has similar holidays to schoolkids. Seems appropriate.

  34. Julie Dyson
    April 12, 2019

    Gloomy stuff for many, perhaps not too bad for Brits. But, Sir John, it’s April 12th – a quite significant date in the Brexit calendar, remember?

    I was honestly expecting a barnstorming, tub-thumping, no-nonsence reminder of just how much this PM and Parliament have consistently, and yet again, failed to live up to expectations and promises.

    It’s a sad day indeed when we only have Nigel Farage reminding us of this… A sign of things to come, perhaps? Have Tory Brexiteers finally given up the fight?

    Reply Of course not. See my recent speeches in Parliament. There are other important matters the UK needs to attend to.I don’t intend to write the same pro Brexit piece every day

    1. Julie Dyson
      April 12, 2019

      Reply to Reply

      That’s a relief! Sincere apologies for allowing my anger and continued frustration to spill over into criticism of your good self, one of the oh so few MPs actually standing by the majority wishes of the people.

    2. The Prangwizard
      April 12, 2019

      Maybe you could tour England making pro-Brexit and pro free market speeches.

  35. Original Richard
    April 12, 2019

    As remainers who are working towards a second referendum to reverse Brexit, May, Hammond and Carney are not going to do anything they think will improve the economy.

    Fortunately their inactivity is good for business and at the same time the deficit is falling.

    1. a-tracy
      April 12, 2019

      You aren’t the only one Richard wondering what these MPs usually do, we are frequently told by Andy and margaret, who know everything about the EU, the UK MPs had the power to overturn EU legislation, stop the austerity measures, stop benefits and free healthcare yet they chose not to.

      Many are now wondering whether we need them anymore when they can’t make a decision, they don’t want their sovereignty, they just like to oppose rather than agree to move forward with the UK in primacy. The DUP should have insisted on a high-level cabinet minister’s job – I’d want Deputy PM or Chancellor or both (and why not when the Lib Dems kept the Tories in power they had Clegg, Cable, Laws, Davey, Alexander.

  36. Brigham
    April 12, 2019

    Could you give us an idea of what, economically, will happen if Corbyn and MacDonnell get their hands on the treasury .

    1. Dame Rita Webb
      April 12, 2019

      Not much. The promise to nationalise the utilities etc will prove to be false (just as the one to eliminate student debt was) their EU masters will block that. All that the will happen is that they will continue, like Osborne and Hammond, to increase the national debt, disincentivize entrepreneurship and target those who bother working with more tax. The borders will remain wide open to those who want to enter from outside the EU. I cannot see why there should be immediate run on sterling, just because the Labour party is overtly socialist, unlike the Conservatives who deceive the voters as to what they actually are.

    2. agricola
      April 12, 2019

      By all they have said they will drain it and we will be back to 2010 to the power of ten.

  37. Lifelogic
    April 12, 2019

    The bank and treasury also need to stop their attacks on the property industries too. The landlord and tenant taxes, the up to 15% stamp duty, the absurdly hight capital gains, the irrational lending restrictions ….. workers and people need places to live (often with flexibility to chop and change as their needs change without being mugged each time).

  38. agricola
    April 12, 2019

    Not really qualified to comment though I see the attack on the car industry as a typical ill informed politians reaction to a problem of pollution that has not been thought through.

    One report read this morning states that the civil service have been instructed to cease work on provision for a no deal Brexit. Is all the preparation complete or is the May off on another tangent to achieve her WA. Perhaps you could enlighten us.

  39. Gareth Warren
    April 12, 2019

    Recessions are when there is too much supply for demand, but here Trump’s America first policy is likely to export it. With German exports particularly high we are likely to be penalized, ironically as members of EU.

    I would say the cost of borrowing is incredibly cheap, but the various “green” initiatives have caused untold damage, Jaguars woes mainly being due to following the diesel hype so badly that in one range of Jags they had just one petrol model, and that was a 5l v8! Clearly brexit is just an excuse from them.

    Hopefully the new government can refrain from indulging the BBC type lefties and stick to making business cheaper and easier with more care made to regulation – lead free solder was a good one, companies have enough incentives from consumers to improve the environment.

    Here we should be in a very strong position to take a no deal and offer USE and EU free trade, if the EU decides to impose tariffs they will open themselves up to a double recession while US companies happily take their market share. While we are in the EU though we just have to take our collective punishment.

  40. Chris
    April 12, 2019

    President Trump is, I understand, planning to restructure banking, and although the Fd Reserve is privately owned, a return to the gold standard would indeed put a spanner in the works for some of those globalists. His policies are focused on protecting “Main street” from the excesses and disasters that Wall Street can result in, ensuring for the future that ordinary people will not have to foot the bill for excesses, risks etc of Wall Street financiers.

    A search on Last Refuge website (Conservative Tree House) on Wall Street versus Main Street brings up some very good well researched analyses of President Trump’s policies. The US President is one truly gifted leader, fighting for his country and his people against the globalist cabal which supports One World Government. It is this globalist force that we are up against as we are trying to leave the EU.

  41. Mike Wilson
    April 12, 2019

    A couple of million cheap votes for Labour if they promise to give the waspy women their pensions. I and my wife would vote for them if they did that.

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