The Fed joins in with more monetary loosening

As the world manufacturing downturn intensifies the Fed has joined the Bank of Japan and the European central Bank in trying to ease the situation. The Fed has decided to create money and expand its balance sheet to ease the obvious shortage of cash in the short term lending markets between banks. This is welcome and necessary.

All the main Central Banks of the world with the exception of the Bank of England are now taking belated action to ease, to try to turn round the manufacturing slowdown created by past policy tightness , by other tax and regulatory policies targeting vehicle manufacture in particular, and the impact of new and additional tariffs.  I must ask again why is the Bank of England standing out against this trend? Who doesn’t it share the analysis and conclusions of other Central Banks?

The Bank of Japan is creating as much money as it takes to buy in government bonds to keep interest rates at zero for 10 year money, and negative rates  for shorter terms. The ECB is keeping the official short rate at zero, with negative rates for many government bonds for longer terms. To do so it is now buying in Euro 20bn a month of bonds. The Fed is putting $75bn overnight into money markets to keep the repo or short interbank rate down in line with official rates. The official rate has been cut twice recently and is probably about to be cut again.

Central banks in India, Turkey, Brazil, Australia, New Zealand and elsewhere have been cutting official rates. All this is seeking to offset the negative impacts of higher taxes, tariffs and tighter lending conditions. So far the actions have not turned the corner for manufacturing, though they have prevented a even faster and deeper slump.

As highlighted here before, the UK not only refuses to join in  with a general  move to assist manufacturing, but the authorities are considering a further restriction on car loans which lies at the heart of part of the problem of insufficient demand for new vehicles.  The latest GDP figures which suggest there will be no recession in the second and third quarters of the year continue to show a very weak vehicle manufacturing sector for the reasons forecast here.

The Bank’s new £20 note shows  the  great Turner painting of the Temeraire on the back. It’s a curious choice for an institution so concerned about our relations with the EU.

This entry was posted in Uncategorized. Bookmark the permalink. Both comments and trackbacks are currently closed.

118 Comments

  1. Lifelogic
    Posted October 11, 2019 at 5:11 am | Permalink

    Indeed I am being deterred from various sensible property and other business investments by the hassle and costs (high margins, fees and restrictive conditions) of bank lending. Plus of course the absurd stamp duty levels of up to 15% and the threat of Corbyn ever getting any of his many insane policies into law. The current banking lending red tape and slotting rules are hugely damaging and misguided. As is the new tax laws that tax landlords (and thus tenants) on profits they have not even made. This is totally unsustainable and very damaging tto property supply.

    • Sir Joe Soap
      Posted October 11, 2019 at 7:07 am | Permalink

      It doesn’t seem to be damaging property supply around here. Whether you’d pay £500k for a shoebox is another matter. Prices need to come down for many reasons, and tighter money does no harm in that respect. The low Pound has done some of the work that a looser Central Bank policy would have. Whether an even weaker Pound is needed on the back of looser money is questionable, to say the least.
      Also encouraging people here to go out and buy more cars which clog the roads, and which the government then decide to tax to the hilt is neither morally nor economically sensible.

    • stred
      Posted October 11, 2019 at 7:51 am | Permalink

      Have you tried the direct lenders such as Funding Circle?

      • Lifelogic
        Posted October 11, 2019 at 3:32 pm | Permalink

        Have considered but can usually get better deals from the banks though still expensive and slow.

    • oldtimer
      Posted October 11, 2019 at 9:02 am | Permalink

      You need to understand that this is the new normal. In case you missed I refer you to Paul Goodman`s brilliant piece over at ConservativeHome yesterday:
      https://www.conservativehome.com/thetorydiary/2019/10/a-modest-proposal-lets-put-bercow-in-charge-and-scrap-democracy-altogether.html
      This puts everything in context.

    • Dan R
      Posted October 11, 2019 at 10:18 am | Permalink

      Agreed, and if the conservative party wanted to do some electioneering properly, they should retract and lay out a solid common sense plan to revive the social housing crisis. Fluidity in the rental sector is fundamental to it’s nature and Osborne as Hammond have point blank leveled it.

  2. stred
    Posted October 11, 2019 at 5:13 am | Permalink

    The UK has an overpaid Remainer with a Green wife working with a Remainer Treasury. It suits them to wreck the car industry and blame it on Brexit.

    • Lifelogic
      Posted October 11, 2019 at 6:19 am | Permalink

      Indeed that seems to be the position. Why is Carney still in post?

      • Sea Warrior
        Posted October 11, 2019 at 8:18 am | Permalink

        The next Governor should be a British citizen. Word has it that there are a few British bankers in the City of London who might be able to do the job.

        • Brigham
          Posted October 11, 2019 at 2:07 pm | Permalink

          I know very little about banking, but I think I could do the job.

      • Hope
        Posted October 11, 2019 at 10:13 am | Permalink

        JR, I am confused by your last paragraph. This is minor to what is going on behind the scenes, supported by Borrell (EU diplomat), Merkel , Macron and many others in senior positions of the undemocratic EU political construct.

        In 2017 Mayhab did not exercise a legitimate veto over PESCO and unification of EU miliatary under EU commission control as we voted leave and are a member of NATO. She stated unconditional support for intelligence, security and defence. Treacherously she did not explain what that meant particularly as the UK voted to leave the EU- not hand over control of its military to it after we leave!

        Extract from an article in Con Woman today that makes it clear the handing over of our military was in a Mayhabs servitude plan.

        .”Theresa May’s Withdrawal Agreement and Boris Johnson’s proposed deal not only commit us to the European Defence Agency and European Defence Fund but also sign us up to Permanent Structured Co-Operation and EU military integration in perpetuity.

        At the current rate of military integration we can expect an EU Common Defence to be established by 2025 with fully integrated Armed Services by 2027….”

        Please explain why this is still the case under Johnson, who went along with thus under Mayhab? More important than a bank note I suggest.

        O/T. Secondly, we read Benn, Hammond, Corbyn remain traitors defying the will of the people will demand second referendum before a general election! Apparently motions being scheduled for 19/10/2019. Even if that means next March. Why would is it to be considered for any of the Tory 21 traitors be given a route back into your party, would that not be electoral suicide?

        ReplyPlease cite the articles of the WA that bind us into PESCO

        • Hope
          Posted October 11, 2019 at 2:38 pm | Permalink

          Please read Lt Gen Johnathan Rileys briefing on 02/09/2019.

          Political Declaration, clauses 104 – 106, an integral part of the binding law of the Withdrawal Agreement under Article 184.

          Withdrawal Agreement’s Clauses 81, 92, 95, 101-103, 104-6; and secondly the Technical Note on External Relations of 24 May 2018.

  3. Lifelogic
    Posted October 11, 2019 at 5:19 am | Permalink

    Question Time last night was again 4 to 1 remainers to Brexit supporters and also 4 to 1 climate alarmist nutters to climate realists. Just Julia Hartley-Brewer was sound and she was just endlessly interrupted.

    The less scientific understanding people have the more they seem to be taken in by the climate alarmist religion. It is very clear that even the ‘renewable’ solutions they propose do not work even in CO2 terms.

    • Martin in Cardiff
      Posted October 11, 2019 at 8:30 am | Permalink

      That is about the most science-free, even fact-free post that I have read in a long time.

      • libertarian
        Posted October 11, 2019 at 4:41 pm | Permalink

        Marty

        Do you not read your own posts then?

  4. Lifelogic
    Posted October 11, 2019 at 5:21 am | Permalink

    Why is the dire Carney still in post? Javid does not inspire any confidence so far.

  5. Mark B
    Posted October 11, 2019 at 5:33 am | Permalink

    Good morning.

    I must ask again why is the Bank of England standing out against this trend?

    And I must say again that the primary concern of the BoE, and any central bank, is to support the national currency. Sterling has been falling for a number of years, especially against the Dollar and, we must remember that commodities such as oil are bought and sold in Dollar’s. This makes buying raw materials expensive plus, we must also consider inflation. Whilst some inflation may be seen as good too much can wreck an economy.

    There are too many people with too many cars, especially in London and the Southeast. Plus they are too expensive. We are in danger of over-supply so, a slowing down down would not hurt plus, it makes buying a new car better for the consumer.

    Turner’s painting of the former French Man-of-War, the Temeraire, marks a transition from the age of sail to steam. It is my favourite painting from Turner. I am not sure what our kind host see into it but I see a nation, whilst lamenting the past, accepts a bold, new, challenging and bright future. I shall be getting one of them £20 notes 😉

    Reply The Temeraire was English built, played a heroic role in defeating the French and Spanish at Teafalgar

    • Mark B
      Posted October 11, 2019 at 5:43 am | Permalink

      Sorry I wish to change lamenting to reminiscing. Only a Remainer would use the former whist, a Leaver would use the latter.

    • Martin in Cardiff
      Posted October 11, 2019 at 6:28 am | Permalink

      Yes, there have been a number of ships called by that name, both French and British.

      The symbolism, of a once-great entity called “reckless” being towed away, to be broken up will not be lost, I don’t think.

      Reply You miss the main point of the picture. This was THE fighting TEmeraire, the hero of Trafalgar whose crew captured two French warships and saved the Victory. THis was not just the passing if the age of sail….

      • Martin in Cardiff
        Posted October 11, 2019 at 6:41 am | Permalink

        Yes, thank you John, but I know that.

        My point, rather, was the meaning of the ship’s name, in relation to the reckless course on which the UK has embarked under your party.

        Someone at the BoE chose well, I think.

        • Alan Joyce
          Posted October 11, 2019 at 8:28 am | Permalink

          Dear Mr. Redwood,

          One’s cup must be less than half-empty to assign to a picture on a banknote some kind of ‘Remainer’ symbolism.

          Re[ply It was not Remainer!

          • Alan Joyce
            Posted October 11, 2019 at 11:23 am | Permalink

            Dear Mr. Redwood,

            Pardon me. Perhaps I did not make it clear.

            I was addressing those who seem to derive some perverse satisfaction from finding fault in our nation’s illustrious past.

            To portray a picture of a great warship on a banknote as somehow symbolic of their perceived decline of our country, requires a special kind of twisted reasoning.

            They view everything through the narrow prism of their own biases and prejudices.

          • Martin in Cardiff
            Posted October 11, 2019 at 12:32 pm | Permalink

            You can tell all that, from an observation as to the meaning of the word “Téméraire”?

            My.

    • Denis Cooper
      Posted October 11, 2019 at 7:58 am | Permalink

      However:

      https://www.nationalgallery.org.uk/paintings/joseph-mallord-william-turner-the-fighting-temeraire

      “The painting was thought to represent the decline of Britain’s naval power.”

      • Mark B
        Posted October 11, 2019 at 12:15 pm | Permalink

        Well they were wrong on that ! To me, as I alluded to, it is the romantic old giving way to the new, much like paper notes giving way to coins and plastic ones. One thing about the Temeraire of 1798 and not the one I thought of (1749), was that it was used as a prison ship. Let us hope that fait does not befall us with regards to the EU.

    • Mark B
      Posted October 11, 2019 at 8:32 am | Permalink

      Reply to reply

      I think there is some confusion here, Sir John.

      HMS Warspite captured Téméraire at the Battle of Lagos on 18 August 1759. She was taken into the Royal Navy as the Third Rate HMS Temeraire.

      https://en.wikipedia.org/wiki/French_ship_T%C3%A9m%C3%A9raire_(1749)

      Reply Thats not the ship of the painting

    • Mitchel
      Posted October 11, 2019 at 10:07 am | Permalink

      Did anyone catch the significance of what Mark Carney said at the Jackson Hole summit in August?From the Reuters report:”World Needs to End Risky Reliance on US Dollar.(23/8/19):

      “BoE Governor,Mark Carney,took aim at the US dollar’s destabilising role in the world economy on Friday and said central banks might need to join together to create their own replacement reserve currency.”

  6. Dominic
    Posted October 11, 2019 at 5:37 am | Permalink

    So some governments are ‘cutting official rates’ to offset the ‘impact of higher taxes’. Why don’t governments stop increasing taxes and leave rates alone? I think I know the answer and it doesn’t the mind of political scientist or an economist to arrive at an answer

    Governments are vested interests in their own right. Their fundamental aim is the protection of its own interest and those it employs.

    Ask yourself why general tax rates are never brought down in a manner designed to liberate the private sector (the engine of prosperity) from the parasitic feeding of the State? Quite simply because the state feeds off the private sector to expand its own operations, influence and grip. And politicians, every politician, is constantly calling for more State spending. Why do politicians do this? They do it for political posturing, virtue signalling and electoral capital

    The aim of government has become the promotion of itself, its powers and its reach and it does this by abusing its sovereign powers to extract from the wealth creating sector.

    Until politicians admit this they have no moral argument to make. They are damned by history

    • cynic
      Posted October 11, 2019 at 8:29 am | Permalink

      Now we are threatened with new sugar taxes and restrictions on what we can eat and drink. Too much government interference!

  7. Pominoz
    Posted October 11, 2019 at 5:38 am | Permalink

    “The Bank’s new £20 note shows the great Turner painting of the Temeraire on the back. It’s a curious choice for an institution so concerned about our relations with the EU.”

    But Turner’s painting is of the vessel being taken to her final berth to be broken up. Perhaps it is a sign by the Establishment figures of utter surrender to the EU!

    Good to see that the new note is made of ‘tried and tested’ washing-machine proof Aussie style polymer.

    • Lifelogic
      Posted October 11, 2019 at 6:17 am | Permalink

      I though the government was against plastics? The plastic ones do seem to work well as a tooth pick I find.

  8. formula57
    Posted October 11, 2019 at 5:45 am | Permalink

    The present madness permitted Greece a few days ago to issue debt at negative rates, despite no material change to the Greek economy since its recent distress bailouts. Perhaps the Bank is aware a reckoning is on its way?

    • Martin in Cardiff
      Posted October 11, 2019 at 6:17 am | Permalink

      The UK economy is complex, and a weak pound is not the help that simpler economics would suggest.

      The BoE knows this, and does not want to do further damage, quite rightly.

      Also, unlike the dollar and the euro, Sterling is not a reserve currency, and so the UK’s scope is more limited for that.

      ReplyWrong again. Sterling is one of the five main currencies used by the IMF alongside yen, dollar, yuan and euro

      • Martin in Cardiff
        Posted October 11, 2019 at 6:51 am | Permalink

        Thank you, yes.

        But their relationships to the size of the economies which use them make the dollar and the euro less vulnerable to speculation etc. than sterling, and the yen, it must be said, so I am intrigued to a degree by Japan’s move.

        • libertarian
          Posted October 11, 2019 at 4:47 pm | Permalink

          Martin

          Give up with your pompous un fact checked posts

          Sterling is a reserve currency

          The worlds most traded currencies ( market speculation)

          1) US dollar
          2) Euro
          3) Yen

          Crying here

      • margaret howard
        Posted October 11, 2019 at 3:33 pm | Permalink

        Reply to reply

        “Wrong again. Sterling is one of the five main currencies used by the IMF alongside yen, dollar, yuan and euro”

        Another one of your usual evasive half replies. Sterling used to be the world’s second reserve currency after the US dollar but has now been replaced by the euro. Why?

        • libertarian
          Posted October 13, 2019 at 9:42 am | Permalink

          Maggs

          Reserve currencies are simply currencies held in the greatest quantity by institutions ( as there are 19 counties who use the Euro its not a surprise really)

          As I pointed out in the post above the Euro is one of the 3 most speculated on currencies, thats why is a reserve currency

          By the way you dont seem to have reported on last weeks SURGE in value of sterling on news that we may have a deal to leave

  9. Martin in Cardiff
    Posted October 11, 2019 at 6:01 am | Permalink

    Téméraire is French for “reckless”, John.

    I’d say that it is bang on the nail comment.

    • formula57
      Posted October 11, 2019 at 6:15 am | Permalink

      So it is a subtle tribute by the Bank to the former UKIP MP Mark!

    • libertarian
      Posted October 13, 2019 at 9:49 am | Permalink

      Martin

      It is also used to describe someone who acts with audacity a risk taker , if only the French had a word for entreprenuer as Donald said

  10. Shirley
    Posted October 11, 2019 at 6:02 am | Permalink

    I may be wrong, and actually hope I am wrong, but I get the distinct impression that Parliament, the ‘establishment’, and the powers that be, are not working for the benefit of UK citizens at all. They seem to be doing their best to avoid helping the UK and it’s citizens by deliberately introducing destabilisation, ie. mass immigration of incompatible cultures, EU supremacy, the UN Migration pact, constant fearmongering, etc.

    • MPC
      Posted October 11, 2019 at 6:51 am | Permalink

      Brexit is almost finished. Mr Grieve is revelling in power without accountability just like his EU mentors. He showed his true colours last night, saying he’ll work with his ‘cross party colleagues’ and wants a 2nd referendum envisaging Remain, a new deal (if available) and No Deal as options. He knows, as does the EU, that playing for time always works. A 2nd referendum would take perhaps a year to arrange, then there’d be a split Leave vote and a Remain ‘victory’ on a very low turnout.

    • agricola
      Posted October 11, 2019 at 7:47 am | Permalink

      True, they are the ultimate threat to democracy.

    • Bob
      Posted October 11, 2019 at 7:52 am | Permalink

      @Shirley
      Haven’t you heard?
      It’s called UN Agenda 21.

    • tim
      Posted October 11, 2019 at 8:16 am | Permalink

      Shirley- I know you are right, but it is just the tip of the iceberg. My Dad told us the same thing about 47 years ago, I wish I had listen to him more and realized what was going on, it is too late. We need to get rid of the political correct brigade. Soon we will be in prison for writing the above. I better keep quiet!

  11. Andy
    Posted October 11, 2019 at 6:05 am | Permalink

    The Bank of England needs some firepower to rescue the economy from your Brexit.

    Not that we know what your Brexit means yet, because El Presidente will not tell us.

    But it sounds like it involves selling out Northern Ireland.

    • Roy Grainger
      Posted October 11, 2019 at 6:21 am | Permalink

      Why are you moaning ? All the opposition parties have full confidence in the PM as demonstrated by them refusing to vote him out of the post. Just off to do my weekly shopping on my little scooter now.

    • sm
      Posted October 11, 2019 at 6:37 am | Permalink

      We should hand back NI to Eire, anyone there who doesn’t want to be part of the RoI should be assisted socially and financially to live in England/Wales/Scotland.

      What a lot of priceless lives (on both sides) and what a shedload of UK taxpayers’ money would have been saved if that had been done a century ago.

      • GilesB
        Posted October 11, 2019 at 7:39 am | Permalink

        NI can’t be ‘handed back’ to Eire.

        It was never part of the Irish Free State.

        The island of Ireland was only ever a unitary state when it was the Kingdom of Ireland, a personal fiefdom of the King of England who created the Kingdom by imposing rule over all of the Gaelic chieftains.

      • Denis Cooper
        Posted October 11, 2019 at 7:46 am | Permalink

        There can be no question of the UK arbitrarily handing Northern Ireland over to the Irish Republic. It was agreed in December 1993 through the Downing Street Declaration:

        https://web.archive.org/web/20130404221626/http://dfa.ie/home/index.aspx?id=8734

        that the people of Northern Ireland themselves would decide whether or not they wished their province to remain a part of the UK or to be joined to the Republic.

        “4. The Prime Minister, on behalf of the British Government, reaffirms that they will uphold the democratic wish of a greater number of the people of Northern Ireland on the issue of whether they prefer to support the Union or a sovereign united Ireland. On this basis, he reiterates, on behalf of the British Government, that they have no selfish strategic or economic interest in Northern Ireland. Their primary interest is to see peace, stability and reconciliation established by agreement among all the people who inhabit the island, and they will work together with the Irish Government to achieve such an agreement, which will embrace the totality of relationships … ”

        Of course there must now be some doubt about the value of that pledge to “uphold the democratic wish of a greater number of the people of Northern Ireland”, given what has happened since the EU referendum.

      • Anonymous
        Posted October 11, 2019 at 10:15 am | Permalink

        Had the IRA chosen Ghandi/Mandella soft power it would have happened by now.

      • margaret howard
        Posted October 11, 2019 at 3:56 pm | Permalink

        sm

        “What a lot of priceless lives (on both sides) and what a shedload of UK taxpayers’ money would have been saved if that had been done a century ago.”

        Glorious hindsight! Would have been even better if the murderous Cromwell hadn’t done his bloody work there and set the Irish against us ever since.

    • agricola
      Posted October 11, 2019 at 7:45 am | Permalink

      The only customer for NI is your beloved EU, and they cannot have it. Whatever Brexit means you will not be happy, but if the effect is good for the UK you will be even more miserable. Incidentally it is not JR’s Brexit alone, it belongs to 17.4 million electors of the UK.

      • Andy
        Posted October 11, 2019 at 2:24 pm | Permalink

        You are right. will not be happy about any Brexit – that is true. I do not see the point in needlessly making my country worse.

        But, amusingly, what you have not realised yet is that you will not be happy about any Brexit either. Sure you will cheer on ‘Brexit Day’ – whenever that is. But when all the changes you start seeing are negative and as the brutal reality of what you face becomes clear you too will be sad.

        As a British resident of Spain, for example, you will be losing some of the rights and privileges you currently have. But you do not know which ones yet. Suffice to say life, for you, will get more expensive. None of us will appreciate that of course because you have stolen from us the right to free movement, which you and your generation have enjoyed.

        And, alas, nobody in this site speaks for 17.4m people. It helps your case to pretend so but I know plenty of leavers who are appalled at what Brexit has become – what you have helped make it – and who want no part in it.

        Remember Brexit does not even start until Brexit Day. Then our fun really begins. Enjoy it. We will.

        • Fred H
          Posted October 14, 2019 at 7:10 pm | Permalink

          you know and still speak to leavers? All younger than 40 I would guess? They must be thick skinned to continue talking to you!

      • Simon Coleman
        Posted October 11, 2019 at 6:58 pm | Permalink

        It doesn’t belong to anyone, any more than the Tory party belongs to Tory voters. You don’t own what you vote for. The idiocy of Brexit voters is mind-boggling.

    • libertarian
      Posted October 13, 2019 at 9:57 am | Permalink

      Andy

      No word from you on the surge in the value of sterling on news we may have a Brexit deal last week . Why is that?

    • libertarian
      Posted October 13, 2019 at 10:20 am | Permalink

      Andy

      “Looks like pro-Europeans are self-destructing. The ECB is revolting against Draghi, and the European Parliament is revolting against Macron and von der Leyen. These people cause more damage that Salvini or Le Pen.” eurointelligence.com

      “The German manufacturing recession is now spilling over into services. Employment holds up, but don’t be fooled. Industry employment is a seriously lagging indicator. -Wolfgang Munchau”

      You might want to look at what you voted for

  12. Sea Warrior
    Posted October 11, 2019 at 6:12 am | Permalink

    ‘The Fed has decided to create money and expand its balance sheet to ease the obvious shortage of cash in the short term lending markets between banks.’ I’m not sure that I understand why this ‘shortage of cash’ has come to pass. Can anyone here offer an explanation?

    • eeyore
      Posted October 11, 2019 at 6:59 am | Permalink

      Rum, eh? I understood the world was awash with money, part the savings of industrious Chinese with nothing to spend it on, part the pension funds of the ever-increasing global elderly, part the creation of spendthrift governments with printing presses in the basement, part magicked up by banks from the earnings of generations yet unborn.

      And yet it is never enough.

      • Mitchel
        Posted October 11, 2019 at 2:49 pm | Permalink

        Someone coined the expression “QE to infinity”during the credit crunch.I have never doubted it.

    • Posted October 11, 2019 at 7:24 am | Permalink

      One of the many problems with a high leverage ratio stems from the flight to safety during periods of stress, which causes bank deposits to soar. Since 2008, while the U.S. economy has struggled, deposits have risen by $2.6 trillion, often with pronounced temporary spikes that remain on a bank’s balance sheet for just a few weeks. A recent example of this occurred during the politically charged debt-ceiling crisis. At that time, deposits jumped by $73 billion, according to Federal Deposit Insurance Corp. data. Deposits provide crucial funding for all banks, but as deposits surge, bank leverage ratios drop. Worse, sudden changes in deposit flow make banks’ leverage ratios volatile. Most banks simply manage this volatility by staying well above the current leverage ratio requirements. That is, they are generally over-capitalized.”

    • acorn
      Posted October 11, 2019 at 11:42 am | Permalink

      Because everybody who has got cash is saving it, taking it out of circulation. The UK has the third largest “current account” deficit on the planet. That means if the Pound drops we start importing inflation. Reducing the base rate will likely depress the Pound further. Reducing the base rate also reduces interest payments to Savers, which reduces their spending power in the economy.

      The Japanese, who are experts at operating MMT backwards, are saving Yen like crazy and not spending any. Abe keeps pumping Yen out and his citizens keep sticking most of it in Abe’s treasury bonds. Hence Japan has a budget deficit of 4% and a debt/GDP of 230%; and, still can’t get inflation off the floor!

      • libertarian
        Posted October 13, 2019 at 10:01 am | Permalink

        acorn

        This “cash” that they are “saving” Where exactly are they “saving it” ?

        You might try reading your posts back to yourself

        Quote

        “Reducing the base rate also reduces interest payments to Savers, which reduces their spending power in the economy” BUT BUT in the same post you told us that the money was out of circulation

  13. Simeon
    Posted October 11, 2019 at 6:16 am | Permalink

    In other news, BJ might be on the cusp of an extraordinary feat of statesmanship; bending the EU to his will, securing a great deal for the UK, delivering Brexit and uniting both the Tory party and the nation. A golden age begins?

    • Ian Wragg
      Posted October 11, 2019 at 7:26 am | Permalink

      It looks more like Mays WA with lipstick. 2 years transition to nowhere, 4 years limit to backstop after that. Continued payments of circa£15 billion annually and all overseen by the ECJ. .
      We will still be under EU control 9 years after the referendum
      The Tory Party will be wiped out at the next election and rightly so.

      • Alan Jutson
        Posted October 11, 2019 at 3:36 pm | Permalink

        Ian

        I have to say that is how I see it at the moment.

        May’s deal with a backstop modification, its the very reason why I could not trust Boris fully to deliver Brexit properly.

        But I guess at the moment we have to wait and see, the devil is always in the detail, but it looks like another 2-4 years of capitulation, uncertainty for business, and anyone else.

    • Mark B
      Posted October 11, 2019 at 8:40 am | Permalink

      It was posted here right from the start by another contributor that, in negotiations one side will already have a concession / card up their sleeve to give at the last minute. It was correctly identified at the time to be the Backstop. The EU will give this concession readily so to make it appear that the UK has gained something, a bit like John Major’s EURO opt-out of Maastricht fame. All this whilst ignoring the real Devil in the detail of the WA.

    • Christine
      Posted October 11, 2019 at 8:46 am | Permalink

      As soon as Boris Johnson puts Theresa May’s dreadful draft treaty back to parliament the opposition will cry “let the people decide”. We will then get a second referendum with the choice between the worst deal in history and remaining in the EU. I don’t trust any of our current politicians, John excluded.

    • Oggy
      Posted October 11, 2019 at 9:24 am | Permalink

      Do I detect some sarcasm there ?
      The progress made maybe because he gave Varadkar and the EU what they wanted. We don’t know the details yet but in any case if Boris’s deal is based on Mrs May’s WA it’s a bad deal.

      • Simeon
        Posted October 11, 2019 at 6:27 pm | Permalink

        Just a little 😉

        But seriously, if the Cummings plan is to obliterate the Tory party by disgusting not just both wings of the party but also its middle, then what we are seeing is excellence of execution. Who could, or would even want to trust the Tories now.

    • Andy
      Posted October 11, 2019 at 2:30 pm | Permalink

      By an ‘extraordinary feat of statesmanship’ you mean he might be about to sell out Northern Ireland in order to deliver something a million miles from what he promised 3 and a bit years ago.

      It is staggering that you are all so desperate for a deal to try to prove the righteousness of your project that you do not care what the deal is.

      You are the type of people that the BBC invented Watchdog for. You will literally buy any old rubbish.

  14. Johnny Dubb
    Posted October 11, 2019 at 6:37 am | Permalink

    Sir John
    2 possible answers to your question:

    1. Mark Carney is the greatest living economist.
    2. Mark Carney does not wish the UK economy to succeed, in order that his false predictions re Brexit and mishandling of the economy are not made further apparent.

    Note on car sales. The motor industry problems are entirely due to the war on diesels, a UK government decision, flying in the face of the superb work done in reducing emissions in recent years. Government assistance in swapping old cars and vans for cleaners new ones would help the economy and air quality immediately.
    A Buy British discount would be even better, but I’m dreaming here, I know.

    • Mockbeggar
      Posted October 11, 2019 at 9:03 am | Permalink

      Interesting how Nissan is threatening to close its Sunderland plant if there is a ‘cliff edge’ Brexit, when we all know that it would be an excuse for them if poor sales threaten the plant anyway. A 10% tariff would probably be less than the reduction in the value of the pound should we leave without a deal.

  15. Bob Dixon
    Posted October 11, 2019 at 6:45 am | Permalink

    Boris believes he can see a pathway to an agreement.

    Varucca is working on a Treaty.Oh dear oh dear.

    Nigel wants a no deal parting on the 31st.

    What does Jeremy what?

    • Simeon
      Posted October 11, 2019 at 9:27 am | Permalink

      Jeremy wants out of the EU. But he also wants to remain leader of the Labour party. Hence the confusion. It is testament to just how much Momentum has invested in Corbyn that he is still in place, because though there are Lexiters, not many of them are to be found in Momentum. Whatever, he cant be trusted, on Brexit or indeed virtually everything else!

  16. Steve Reay
    Posted October 11, 2019 at 7:06 am | Permalink

    You need to create demand not funny money and low interest rates and including job security .

  17. Alec
    Posted October 11, 2019 at 7:26 am | Permalink

    So your idea of good monetary policy is to devalue and print. Destroy what tiny residual value there is in the currency and continue the race to the bottom that has so enriched the bankers and elites whilst impoverishing the rest of us. Well I wonder just how much the can can be licked down the road now. Negative interest rates already exist on the continent and that is the death knell of an economy. Deutsche Bank is only clinging to life by massive injections of liquidity and probably a lot more banks are not much different. Once they go this sham of a world economy created by unlimited credit and false accounting is likely to collapse and all the juicing up credit, money printing and negative rates in the universe won’t save it.

    Reply My idea of a good monetary policy is one which gets the best balance between inflation and growth

  18. Dominic
    Posted October 11, 2019 at 7:43 am | Permalink

    Johnson’s got zero intentions of delivering Brexit. To see him pandering like a poodle to the PM of a tiny nation (in GDP terms) like Ireland is enough evidence I need to confirm that he’s dancing to the tune of Merkel who’s using the Irish PM as her conduit

    You can’t trust rancid Labour nor the idiots in the LD. And now we know we can’t trust another Tory PM. Why decent, moral politicians like Redwood even belong to this party baffles me

    • rose
      Posted October 11, 2019 at 8:11 pm | Permalink

      Well, he might be fooling the enemy behind him wile the EU is trying to wash away the memory of Frau Merkel’s dawn raid on Downing St.

      If, however, there is anything in the gossip emanating from the FT that we might be collecting tariffs for the EU in NI after we have left, and sending 80% of them to Brussels, then this needs to be nipped in the bud, Sir John. Besides taking money out of the pockets of the poor, it could also be the thin end of the wedge to stymie our free ports there.

  19. margaret
    Posted October 11, 2019 at 7:55 am | Permalink

    As I blogged many years ago economics are certainly not my strong point , however I thought that by devaluing their currencies by more supply and strengthening our pound we would certainly be in a position to buy more easily, which is desirable to all others.

    The UK manufacturing system will be difficult to build up again quickly and world wide relations are important at this juncture.Short, middle and long term thinking must be applied.

  20. Everhopeful
    Posted October 11, 2019 at 8:28 am | Permalink

    Wasn’t the ship on its way to be broken up?
    The choice might be a nasty sideswipe at England’s faded glory.
    Well…who faded it…eh?

  21. Excalibur
    Posted October 11, 2019 at 8:35 am | Permalink

    Off topic. What a delight to see the nasal, arch leftist, Stephen John Sackur outwitted on BBC’s HARDtalk, by the financier and Brexit donor, Stuart Wheeler. This quiet, self-effacing gentleman refused to be browbeaten. Watch it, it will give you much pleasure.

    • Mitchel
      Posted October 11, 2019 at 2:43 pm | Permalink

      See also Sackur’s Sergei Lavrov interview (it’s on youtube);some absolutely cracking responses!

    • margaret howard
      Posted October 11, 2019 at 3:14 pm | Permalink

      Excalibur

      “Watch it, it will give you much pleasure.”

      Yes it did – specially his answer as to why he is such a fervent Brexiteer: “Because since 1066 we have run our own affairs”

      Priceless.

      • libertarian
        Posted October 13, 2019 at 10:14 am | Permalink

        Margaret H

        This is also priceless as I warned you some time ago

        “The German manufacturing recession is now spilling over into services. Employment holds up, but don’t be fooled. Industry employment is a seriously lagging indicator. – eurointelligence.com “

  22. ian
    Posted October 11, 2019 at 9:34 am | Permalink

    The stock markets in the USA and elsewhere have been in a loop for nearly two years now unable to go up, so they have started to print more money to force the markets up.

    Surprise surprise.

  23. Drigger
    Posted October 11, 2019 at 9:45 am | Permalink

    I could predict what the Bank of England was going to do at least two days in advance.
    My source? I watched a certain TV programme based in Canada where they interviewed people in the know from Canada and USA and gave “their take on it”. They did not speak of the BoE or their former economics wizard Mr Carney of the Bank of England.
    Mr Carney never disappointed. It was as if, though not likely, he had just picked up the phone to his friends in Canada in banking circles and decided to come out the following day in lockstep.
    He is not in lockstep now, in my opinion, and I wonder just what has got into him. He is set to leave his job. When I,…leave a position I do so leaving everything just as it should be. It’s just me.

  24. William Long
    Posted October 11, 2019 at 9:51 am | Permalink

    I suspect Javid is already going native after only a few weeks in contact with the Treasury and will do nothing to stand in the way of its predeliction for EU inflicted ‘Austerity’. The use of the Temeraire image is symptomatic of the lack of imagination at the top of the financial management of our country.
    Incidentally, I am looking forward to hearing you in Exeter in a weeks time.

  25. Posted October 11, 2019 at 11:20 am | Permalink

    One might find it useful to remember that Governor of the Bank of England is Mark Carney, a Canadian who, for better or worse, was a leader during the 2008 crash in a system which — unlike most other First World banks — did not fail.
    Canadian banking is extremely conservative and restrictive, which is what “saved” them from the same fate of other banking systems in 2008. Whether this conservatives is a good or a bad call this time around remains to be seen.

  26. ian
    Posted October 11, 2019 at 11:24 am | Permalink

    The FED is Bussey channelling money to European banks who have bank branches in the USA, why is the fed doing this, so when the stock market does push up all the banks will have lots of money and won’t go bankrupt and cut companies funding and loans, imagine a big bank in the EU goes belly up halfway into a stock market push, all their efforts would be for nothing as the markets unwind.

    Done the same thing in 2008/9, bailout out european banks with US dollars, doesn’t say much about the ECB or BOE.

  27. Dominic
    Posted October 11, 2019 at 11:30 am | Permalink

    ‘The Bank’s new £20 note shows the great Turner painting of the Temeraire on the back. It’s a curious choice for an institution so concerned about our relations with the EU.’

    It’s no surprise to those who understand just how far the EU’s infected our public institutions. And what’s even worse? Most of the Tory party’s sat back and actively encouraged it.

    Other than a handful of Tory MPs including our kind host, the rest of the gutless Tory rabble are complicit in the systematic erosion of the independence of our most revered public bodies by the EU and rancid Labour

    I can’t think of one public body that is now impartial, moral and apolitical

    Gramsci will be looking up from below drooling with approbation.

    • steve
      Posted October 11, 2019 at 6:51 pm | Permalink

      Well said Dominic

  28. Alasdair Macleod
    Posted October 11, 2019 at 11:46 am | Permalink

    I’m afraid the idea that suppressing interest rates and expanding the money supply will kickstart the economy has been disproved time and time again, most recently by the ECB’s unhappy experience.

    What is never admitted is that monetary inflation simply transfers wealth from the productive class to the government, its licensed banks and their favoured customers. These inflationist Keynesian policies have only impoverished the nation, as Hayek made clear would happen.

  29. Rule Britannia
    Posted October 11, 2019 at 12:23 pm | Permalink

    Carney arrived to much fanfare. His forward guidance has always come unravelled and he has proved to be an establishment stooge in many ways – one cannot help but wonder if the current intransigence is trying to put a brake on our economy to avoid egg-on-face over Brexit predictions – and to make Brexit seem less attractive going forward.

    Let’s hope Javid has the sense to appoint a Brexiteer and ignore the ‘interviews’ the treasury conducted without being asked (which was basically a list of remoaners).

    • Lifelogic
      Posted October 11, 2019 at 3:29 pm | Permalink

      “Let’s hope Javid has the sense” – well indeed but not much sign of it so far.

    • BillM
      Posted October 11, 2019 at 5:51 pm | Permalink

      Unlike his predecessors, Mr Javid has an impressive CV around the banking sector. After appointments in London, NY(Covering South America) and Singapore(Covering Asia) he left is high salary (£3M) job to become an MP.
      Clearly, he is not there for the money.
      For once, I hope, the Treasury have met their superior and that Mr Javid will “persuade” them to change their ways to suit the British people and no longer themselves. Isn’t that what they are paid to do?

  30. Lindsay McDougall
    Posted October 11, 2019 at 1:25 pm | Permalink

    General monetary looseness is not a remedy for a specific problem, which is demand for motor vehicles. Governments world wide need to piss or get off the pot. What restrictions are Governments going to place on the types of motor vehicle we can buy? Will the restrictions apply only to towns and cities or to everywhere? What is a reasonable transition period so that individuals who have recently made a major purchase do not have to write down the value of the asset they have acquired? Will there be a scrappage scheme or not?

    It is not the duty of the Bank of England to answer these questions. It is the duty of central Governments. And, to borrow a phrase, the clock is ticking. Uncertainty is the enemy of good decision making and investment.

  31. Fedupsoutherner
    Posted October 11, 2019 at 2:30 pm | Permalink

    Sir John, could you please consider telling us exactly what the new WA is going to look like when you get sight of it please. I want to know just what we are signing up to. I have a funny feeling it won’t be a true leaving position.

  32. Denis Cooper
    Posted October 11, 2019 at 3:43 pm | Permalink

    While waiting for hard news on how Boris Johnson has sold us out I have penned a letter to our local “comic”, as some ignoramus on here described that august 150 year old organ the Maidenhead Advertiser, as follows:

    “David Condon upbraids me for referring to a “molehill” on the Irish land border.

    Well, after more than two years of the UK government allowing the Irish government to vastly exaggerate its importance the present administration has started to emphasise that the goods crossing that border comprise about one per cent of total trade between the UK and the EU.

    While twenty months ago it was pointed out in these pages that those UK exports comprise a mere 0.1 per cent of UK GDP.

    (Viewpoint, February 22 2018, “Easy solution to EU border conundrum”)

    Perhaps the government will eventually catch up with that, and with other statistics which put the problem into a proper perspective.

    For example, that goods driven across the Irish border correspond to less than 0.2 per cent of total imports into the EU, and to an insignificant 0.02 per cent of EU collective GDP.

    Some months later the editor was kind enough to print another letter which started:

    “Clearly our Prime Minister is still confounded by the mountain that the EU has made out of a molehill on the Irish border”

    and went on to suggest a draft of a letter which she could send to the Irish Prime Minister Leo Varadkar.

    (Viewpoint, July 5 2018, “The solution to the Irish border question”)

    That draft included a good offer, that the UK would pass strong export control laws to prevent the border being used as a backdoor for contraband goods to enter the EU Single Market.

    Although in truth it would be a pretty small backdoor, more like a cat flap.

    As one of her constituents I sent a copy of that letter to Theresa May; and it was duly acknowledged by her assistant with an assurance that she had taken on board the thoughts it contained, before she went on to do more or less the opposite.”

  33. Richard Evans
    Posted October 11, 2019 at 4:00 pm | Permalink

    Look who owns and controls the Central Banks of the majority of banks throughout the World, BoE included. Who are they connected to? Who owns the FED.
    Why is Donald Trump fighting the FED.

  34. Richard Evans
    Posted October 11, 2019 at 4:01 pm | Permalink

    .OOPS……..majority of countries throughout the World…..

  35. Steve Reay
    Posted October 11, 2019 at 4:12 pm | Permalink

    Not leaving on the 31st,Boris may have capitulated. Reminds me of Theresa May.

  36. acorn
    Posted October 11, 2019 at 4:12 pm | Permalink

    “The UK Government has signed contracts with four ferry companies to provide freight capacity in the event of a no-deal Brexit. Deals worth a total of up to £86.6 million have been made with Brittany Ferries, DFDS, P&O and Stena Line to transport as many as 3,000 lorries per week for six months from October 31.” (Press Association)

    Is somebody taking the piss here or what?

    • Edward2
      Posted October 12, 2019 at 7:01 am | Permalink

      No acorn.
      Just the government doing some preparations.

      • acorn
        Posted October 12, 2019 at 12:12 pm | Permalink

        But you told us that there wouldn’t be any problems at the Ports, it was all project fear!

        • libertarian
          Posted October 13, 2019 at 9:32 am | Permalink

          acorn

          If you knew the first thing ( you dont) about the Port of Dover ( I’m sure it was you who told me that Le Shuttle and the tunnel were in Dover) you would know that we’ve had traffic congestion at the Port & M20 motorway for more than 20 years . We know that once we leave they will show pictures of lorries stuck on M20 and at Dover and claim its Brexit

          The BBC even used pictures of Operation Stack to show what it would be like .. lol thats lorry congestion WHILE still in the “frictionless, seamless , wondrous single market”

          You told us that the Faroe Islands bought the Scottish Salmon Co….. they didnt

        • Edward2
          Posted October 13, 2019 at 4:01 pm | Permalink

          Acorn.
          I dont think there will be any problems.
          Unless the EU deliberately try to play up.
          But, if the government didn’t prepare for every eventuality after October 31st, you would be the first to complain.
          Now because they very sensibly have prepared you still complain.
          Hilarious remainer logic.

  37. Prigger
    Posted October 11, 2019 at 4:14 pm | Permalink

    Wasn’t HMS Temeraire said to have been built in the very same dockyard Medway, Chatham etc in 1798 where the Dutch nicked our ships in 1667? Just wondering. Holland and colonies was controlled, invaded by Napoleon three years before 1798 in 1795 but was said to be ordered in 1790. We built her pretty quick didn’t we. Just as well.

    • Mitchel
      Posted October 12, 2019 at 1:00 pm | Permalink

      Holland(then renamed the Batavian Republic )was invaded by an Anglo-Russian force(possibly the first and only joint operation with Russia)under the Duke of York in 1799 in an attempt to steal away the ships of the Dutch/ Batavian navy.

      The operation had some initial success although was generally deemed a failure, the Duke of York discredited and relations with Russia soured.

  38. Prigger
    Posted October 11, 2019 at 4:22 pm | Permalink

    One is convinced the media of the 1790s were just as truthful as today

  39. BillM
    Posted October 11, 2019 at 5:08 pm | Permalink

    Surely a business only borrows to invest to create a decent return on that investment?
    That there is a shortage of money does not make sense. Looking at the Bond auction results across the globe, it would seem that so many investors now prefer to put their money into secure but very low yielding bonds (now in many cases, negative interest rates) rather than gamble in the Private sector.
    Therefore, I cannot understand the logic whereby a Central Bank buys up more Government Bonds from those held by other sources, thus increasing the bond prices but lowering their respective yields, just to release more cash to those lending sources, when there are already a lack of takers to borrow any of it. Albeit at ultra- low interest rates.
    All this does is to ensure that those banks et al, holding these bonds, will make a nice healthy profit from selling to their Central Bank at an inflated price.
    This is where it all went wrong in 2010 and eventually created a massive global debt of around $250 Trillions. Some four times the size of total global GDP.
    Surely this process cannot be a good thing anymore?

  40. steve
    Posted October 11, 2019 at 6:49 pm | Permalink

    JR

    Thank you for another informative item.

    However I did wonder if perhaps a better subject would be concerning what Boris has been up to lately.

    The feeling is that he has made massive concessions to the EU via the Irish PM. If so, then it is very serious.

    People made it very clear there were to be no more concessions, and if there were, the tory party would be finished for good at the next general election.

    Though Downing street is staying tight lipped – which means they have something to hide.

  41. mancunius
    Posted October 11, 2019 at 8:14 pm | Permalink

    As to the Fighting Temeraire, which so bravely contributed to Nelson’s victory at Trafalgar, by its withering broadside fire on the French ships, I expect Mr Grieve will tell us that it was actually the French who won the Battle of Trafalgar; while Mr Hammond will explain that ‘many people voted to remain’ in the customs union of the French continental system, and Mr Letwin will assert that Britain should have ‘reached a compromise’ with the Napoleonic empire; while Mr Gauke will claim that Nelson had no specific parliamentary backing for his battle plan.

  42. Steve
    Posted October 11, 2019 at 9:13 pm | Permalink

    We see everything is picking up with the news that they may be able to find a pathway out to an agreement..we’ll know in a few days..here’s hoping it all goes in an orderly way

  43. Mike Wilson
    Posted October 12, 2019 at 11:25 am | Permalink

    I fail to understand your obsession with low interest rates and ever increasing debt to create growth. How much is being spent servicing government debt now?

  44. Pete
    Posted October 12, 2019 at 2:21 pm | Permalink

    “…are considering a further restriction on car loans which lies at the heart of part of the problem of insufficient demand for new vehicles…”

    Last I read , the PCP phenomenon was being regarded as a massive credit bubble that is going to, inevitably, burst and create havoc worse than we experienced in 2008. Are we now to assume that it’s in fact nothing of the sort and everyone should embrace more personal debt?

  45. Steve Reay
    Posted October 13, 2019 at 11:37 am | Permalink

    according to Carney. “There is a need for [action] to achieve net zero emissions, but actually it comes at a time when there is a need for a big increase in investment globally to accelerate the pace of global growth, to help get global interest rates up, to get us out of this low-growth, low-interest-rate trap we are in.”

  • About John Redwood


    John Redwood won a free place at Kent College, Canterbury, He graduated from Magdalen College Oxford, has a DPhil and is a fellow of All Souls College. A businessman by background, he has been a director of NM Rothschild merchant bank and chairman of a quoted industrial PLC.

  • John’s Books

  • Email Alerts

    You can sign up to receive John's blog posts by e-mail by entering your e-mail address in the box below.

    Enter your email address:

    Delivered by FeedBurner

    The e-mail service is powered by Google's FeedBurner service. Your information is not shared.

  • Map of Visitors

    Locations of visitors to this page