We need change at the Bank of England

I look forward to new leadership at the Bank of England. The current leadership allowed their independence to be tarnished by one sided interventions in the referendum. They compounded the error by making absurdly pessimistic forecasts of house prices, output and unemployment for the short term after any Leave vote. In this they followed in the long unfortunate tradition of the Bank in always recommending and supporting EU policies that were damaging. The Bank’s worst error was recommending UK membership of the European Exchange Rate Mechanism in the 1980s which led to a slump and the long term defeat of the Conservative party which accepted the advice.

The new Governor should have to answer three basic questions about the task ahead:

1 Why is the Bank of England tightening money so markedly when all the other main Central Banks are loosening to stave off the world economic downturn?

2. What action should the Bank take to promote UK growth, given the bad slowdown now experienced?

3. When will the Bank think through the flattening of the Philips curve and the move from national to global capacity, issues which undermine the current basis of assessing interest rates?

I spoke about this yesterday in the Chamber. I did not have time to develop the issue of what the Bank should do to stimulate growth. Some say Central Banks have run out of options with rates so low and QE so large from past programmes. I do not agree. CBs have a huge range of instruments and options to boost activity.

They can cut rates, run Funding for lending programmes, operate LTROs, intervene in money markets, intervene in bond markets, use repo markets, issue new guidance, change banking ratios.

There are two basic ways of stimulating growth. One way is to expand the Central Bank’s balance sheet by QE or money market interventions. The other is to expand commercial banks balance sheets by reducing capital ratios, relaxing lending controls or by open market operations.

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77 Comments

  1. Pominoz
    Posted December 20, 2019 at 5:06 am | Permalink

    Sir John,

    What can we do here to persuade Boris that any cabinet reshuffle should see you replace Sajid Javid?

    • eeyore
      Posted December 20, 2019 at 6:52 am | Permalink

      I’d rather see JR at the Bank. Is anyone in Britain better qualified?

      • bill brown
        Posted December 20, 2019 at 10:25 am | Permalink

        Eeyore

        Lots of candidates are better qualified and we need somebody younger as well

    • Martin in Cardiff
      Posted December 20, 2019 at 8:17 am | Permalink

      There will be virtually nothing that anyone can do about anything that this government proposes, nor about Johnson’s decisions, as long as they remain within the law, until towards the next General Election.

      I don’t see the eager-to-please new MPs forming some sort of rebel alliance any time soon, but equally neither do I see Downing Street doing anything to damage seriously party unity.

    • Hope
      Posted December 20, 2019 at 9:50 am | Permalink

      JR and readers suggest you read Kathy Gyngell Con Woman today to remind yourselves of what Traitor Mayhab was about over the last three years. Lancaster speech which set out leaving the EU properly were quickly replaced and buried with her two later speeches. Only her association agreement or nothing. Using hoax Irish border, economic castrophe warnings from Hammond to bolster her ramain plan. She and some her remain cabal simmering and building once again in the Tory party.

      She betrayed the nation and David Davis by binning his leave plan in the most underhand way set out at Chequers. She aligned the UK so it could rejoin under the EU five year plan, she subordinated our military to the EU, subordinated our foreign and defence policy to the EU, deliberately aligned to EU regulation not to be more competitive to the EU. More like an accession treaty than leaving- Barnier exclaimed the same. Yesterday in Parliament she was at it again, how the UK workers rights etc should be aligned! No, no, no. Get rid of her WA and PD and get rid of her. Johnson needs to wake up, fast.

  2. Mark B
    Posted December 20, 2019 at 5:36 am | Permalink

    Good morning.

    The Bank’s worst error was recommending UK membership of the European Exchange Rate Mechanism . . .

    I am sorry, Sir John but that is a bit rich ! It was Mrs. T that took us in agaist the advice of, Sir Alan Walters but, she was pressured into it by, John Major and others. The BoE may have had a hand in it but, it was government and Conservative Party decision, and that government and party need to take resposibility for that decision and all that came after it.

    There are two basic ways of stimulating growth.

    I disagree. It is not the business of the BoE to stimulate growth. Their job is to ensure sound money and markets.

    If the government wants to stimulate growth, may I suggest getting rid of the Climate Change Act, reduce taxation and government spending. We do not need HS2 or ultra expensive wind farms and nuclear. Go for shale gas and cut consumption by really reducing immigration. Less is more.

    Finally. Stop finding evermore ways to waste public money !

    • Hope
      Posted December 20, 2019 at 9:14 am | Permalink

      Well said Mark. Who appointed Carney and extended his contract? Why was he not sacked when he failed to act on his rules i.e. When unemployment fell by.. he would raise interest rates etc. He never acted on what he pronounced! He was allowed to became too political by the Tory chancellors. They could have told him to wind his neck in, but it was all part of the Tory govt project fear.

      Dennis has adfinitum provided facts about loss to U.K. Economy being minimal despite repeated sensationalmlanguage toscare the public by the Govt. Mayhab should have been forced to quit not allowed to stand. She allowed scare propaganda throughout her term in office and slapped down Johnson and other for publicly supporting govt policy to leave EU!

      Johnson let it be leaked MPs could be post investigated for colluding with EU. He should so starting with Mayhab’s dishonest Kitkat policy.

      It looks like Johnson will lead your party and govt into public hatred through sleaze. Goldsmith now becoming a peer because he is mates with zjohnsons girlfriend! All chummy appointments whether BoE or peers should stop to raise standards as parliament is held in all time low regard. People govt repay trust will not wash when Johnson’s actions are in stark contrast.

    • Bob
      Posted December 20, 2019 at 9:45 am | Permalink

      “Stop finding evermore ways to waste public money !”

      Excellent advice! After that, repeal the existing harebrained schemes like the prescribed .7% for overseas aid.

  3. Bob Dixon
    Posted December 20, 2019 at 6:19 am | Permalink

    Is it just the Governor we want replacing or Managers further down the line?

  4. Nig l
    Posted December 20, 2019 at 6:31 am | Permalink

    Looking at the amount of money the Government is going to throw around, won’t that stimulate growth and why all the blame on the BOE? Surely slashing taxes would also do it but it now seems more Blair than Thatcher.

    • Sea Warrior
      Posted December 20, 2019 at 7:28 am | Permalink

      I don’t trust governments – even this one – to spend money wisely. Perhaps the best way to keep the investment decision-making process sound is to keep interest rates at NORMAL levels and profits in the hands of the businesses generating them. The first thing that Boris should do to promote ‘growth’ is to order ‘full speed ahead’ with the Free Ports initiative.

    • Roy Grainger
      Posted December 20, 2019 at 9:25 am | Permalink

      Looking to America, Trump’s big reduction in corporate tax has helped boost growth and employment enormously (and increased tax revenues from companies repatriating profits). Maybe try that – or are we prevented by EU level playing field demands?

  5. Shirley
    Posted December 20, 2019 at 6:33 am | Permalink

    Carney ruined his reputation with his pre-referendum Project Fear. He maybe thought (as others did) that his forecasts would never be tested. However, he tried to sway opinion over to Remain, and succeeded with many voters. His post should be non-political and he broke the rule. Then again, there were very many Remainers who broke the rules of democracy and fair play.

    Get rid as soon as possible. He cannot be trusted to put UK interests first.

    • Andy
      Posted December 20, 2019 at 9:09 am | Permalink

      Spoken like a Leaver who seems unaware she is in the minority. We will inevitably undo Brexit because most people now do not want it.

      • Pominoz
        Posted December 20, 2019 at 9:56 am | Permalink

        Cobblers

      • William Potter
        Posted December 20, 2019 at 10:04 am | Permalink

        That’s not what the GE said.

      • Roy Grainger
        Posted December 20, 2019 at 10:05 am | Permalink

        Parliament is sovereign Andy. Like you told us. So what a majority of MPs want is literally all that matters, what your supposed majority of voters want is totally irrelevant. It’s almost as if you’re just ignoring the last two years.

      • Shirley
        Posted December 20, 2019 at 10:06 am | Permalink

        Minority? What massaging (more like contortions) of statistics have you completed to get to that result?

      • Bob
        Posted December 20, 2019 at 10:51 am | Permalink

        “undo Brexit because most people now do not want it.”

        Where did you get that idea from Andy?

        The Tories were for leaving
        The Lib Dems were for remaining
        Labour were for free high speed broadband

        The landslide to the Tories doesn’t support your assertion.

        And a quick glimpse at some of the arch remainers who lost their seats tells a story:

        Anna Soubry
        Antoinette Sandbach
        Chuka Umunna
        David Gauke
        Dominic Grieve
        Heidi Allen
        Jo Swinson
        Laura Pidcock
        Luciana Berger
        Nick Boles
        Philip Lee
        Sam Gyimah
        Sarah Woolaston
        Tom Brake

        • Lifelogic
          Posted December 20, 2019 at 9:18 pm | Permalink

          Well that list cheered me up a bit, but still loads of appallingly dire Libdems pretending to be Conservative MPs. Some who even voted for the treachery of the Benn act.

      • Denis Cooper
        Posted December 20, 2019 at 11:07 am | Permalink

        As proved on December 12th, when the Liberal Democrats stormed to victory and the pro-Brexit Tories came close to annihilation.

        • Simeon
          Posted December 20, 2019 at 5:01 pm | Permalink

          The Tories are pro ‘Getting Brexit Done’, not pro Brexit, a not-that-subtle difference. I know Andy is a troll, but we should always aim for accuracy.

      • Richard1
        Posted December 20, 2019 at 11:50 am | Permalink

        yup that’s why the people rose up as one and voted LibDem, the clearly anti-Brexit Party, and Jo Swinson is now PM, as she predicted.

      • libertarian
        Posted December 20, 2019 at 7:05 pm | Permalink

        Andy

        Yeh so many people want to remain that they voted a Brexit landslide

        You live in a bubble of one

        • Martin in Cardiff
          Posted December 20, 2019 at 9:30 pm | Permalink

          No, about sixteen million voted for parties which would either cancel exit or hold another vote.

          Around fourteen million for the Tories, ukip, and BXP.

          • NickC
            Posted December 21, 2019 at 12:21 am | Permalink

            Martin, It wasn’t a referendum. In the real Referendum, you lost. And you know as well as I do that there will have been plenty of Leave Labour voters who, in a direct referendum, would not vote on party lines. In any case due to the vagaries of FPTP you lost again.

          • Martin in Cardiff
            Posted December 21, 2019 at 11:21 am | Permalink

            Well have a word with the rest of your side to stop claiming that it was a referendum then, Nick.

            Make up your minds, do.

            I didn’t claim that it was. They did. And they claim that they won it resoundingly, and therefore that “the people” want to leave the European Union.

            It is baloney. The country remains bitterly divided.

          • libertarian
            Posted December 21, 2019 at 6:36 pm | Permalink

            Marty boy you’ve now lost 5 straight times in every form of vote. At some point you just have to recognize that you are the losers

            Oh and by the way your Labour party because it got on the wrong side of its own voters got smashed out of sight.

            At the end of this next parliament it will be 50 ( Fifty ) years since Labour won a majority that wasn’t led by Tony Blair , think on that

    • Hope
      Posted December 20, 2019 at 9:23 am | Permalink

      Agreed Shirley, but I suggest it was in in concert with the Tory chancellors as part of project fear.

      Look at appointments such as Keir Starmer as th head of the CPS! Who could appoint such a person to a high profile role where they have extreme political views? These appointments infest all public sector appointments under Blaire. Tories have done nothing to reverse during their nine years in office. Quite the opposite Cameron was appointing Former Labour ministers and MPs to lead in quango roles! The Tory party stacking the deck against themselves to change society , quite perverse.

      We were promised change under Cameron and Mayhab to selection of peers, both lied/failed. Looks like a week in office and thismfailure by themTory govt continues.

    • Bob
      Posted December 20, 2019 at 9:47 am | Permalink

      Hear hear!

  6. agricola
    Posted December 20, 2019 at 6:43 am | Permalink

    This one is outside my paygrade though I do sense that the BoE have yet to get on side with a Brexit committed UK. It cannot be just the Govenor because he has a group of advisors. If you decide to drain this particularly politically driven swamp where do you find replacements. My instinct would be to look among successful merchant bankers. What are the Rothschilds up to these days. You have worked in these circles. Analysis is necessary, but guidance would be very useful.

    Reply I have not worked for Rothschilds this century! I have no idea what they are doing.

    • agricola
      Posted December 20, 2019 at 11:45 am | Permalink

      It was merely a plea that the BoE be run by people who know what they are doing in the world of finance. As to the Rothschilds, their mention was merely to indicate that there are members of the family capable of turning sixpence into half a crown, and such expertise is what the country needs. I would point out that they also produce some notable wine.

  7. Simeon
    Posted December 20, 2019 at 6:56 am | Permalink

    OFF TOPIC

    The time is nigh. Assuming the government whips aren’t going to have to ‘talk you down from the ceiling’ to vote in favour of the WAB at second reading today, what ammendments, if any, are you thinking of tabling to the Bill, and why – or indeed why not? Feel free to also explain why you are no longer on the ceiling.

    • Roy Grainger
      Posted December 20, 2019 at 10:02 am | Permalink

      The new Speaker didn’t select any amendments to be debated.

      • Simeon
        Posted December 20, 2019 at 4:58 pm | Permalink

        Which tells its own story. And of course the WA passed its second reading today without incident.

        Our kind host has always acknowledged that the WA is not perfect (a huge understatement of course), though was obviously unwilling to repeat many criticisms made of WA1 that still applied to WA2. He was also coy about his support for it – he certainly wasn’t echoing his leader’s view of it being a ‘great deal’. But in truth, Sir John’s personal view is of virtually no importance now. He is but one of 350 votes. What is clear is the intention of the Tory party. All those hoping the WA would be dropped in event of a Tory majority have been finally disabused of that hope today.

        • NickC
          Posted December 20, 2019 at 8:00 pm | Permalink

          Simeon, Yes, I really do not understand the Tory party. They describe the Boris WA as Brexit. But they know as well as I do that the EU will have almost identical control over the UK on 1 Feb 2020 as the EU does now. It’s such an unforced error. It will come back to bite them when the EU is still taking our fish in June 2020, or similar, and those less interested in politics find out, having trusted the Tories.

          It’s just like autumn 2016 – high hopes about to be dashed by incipient betrayal.

    • Simeon
      Posted December 20, 2019 at 10:17 am | Permalink

      So… no ammendments then? This makes sense. After all, in Boris you trust. And risking a delay to ‘getting Brexit done’ would not be in keeping with the manifesto. I’m sure all will be explained in due course.

      By the way, I noted Jenkins’ quip about the ERG now being the MSG, or Manifesto Support Group. How heartwarming to see remainers and leavers alike united in the Tory party. I also noticed your absence from Steve Baker’s goon squad team photo. To your credit I thought.

  8. Dominic
    Posted December 20, 2019 at 7:00 am | Permalink

    I see little point in challenging an institution of the British State if reference isn’t made to the persons employed to run those organisations. Identify those you’re challenging and state why you believe them to be unsuitable. With this approach we can see exactly who incites concern and why they should be removed.

    Carney is a pro-EU place-man. We all know this to be true. Say so. John wants him removed. Say so.

    Politicians who refuse to tell it as it is are the bane of this country.

    ps. Wealth creation is a consequence of human effort, ingenuity and creativity not a consequence of decisions taken by politicised bureaucrats and politicians

  9. Richard1
    Posted December 20, 2019 at 7:34 am | Permalink

    Wouldn’t we be better off without all this micromanagement of banks? all that happens is the various capital ratios become a target. If it was completely clear that there would never under any circs be a govt bailout of a bank, all that would be on offer is access to liquidity at the central bank against collateral and at a cost, the market could focus on the only ratio which really matters – leverage. Banks which were leveraged 50x, as some were pre-crisis, would find they couldn’t fund themselves. Auditors would refuse to sign accounts. The BoE could in addition have a simple to understand traffic light system to alert consumers to the level of leverage in a bank.

    This would allow the huge amount of resource deployed in making and complying with regulations to be re-deployed more usefully.

    • NickC
      Posted December 20, 2019 at 8:03 pm | Permalink

      Separate out merchant banks from retail banks. Then only guarantee retail bank deposits.

  10. Kevin
    Posted December 20, 2019 at 8:20 am | Permalink

    Is this a day to bury bad news? The bad news that the Theresa May Government and the “Remain” Parliament are – completely without necessity – about to leave their mark on this country for decades to come, as the new Conservative majority waves through the Withdrawal Agreement. The Conservative Party claims that we will leave the EU on 31st January, yet at least some media outlets are, confusingly, talking about us “leaving with no deal” in December 2020. Why would they do that? Surely because we are not Leaving next month – we are simply Withdrawing our MEPs and other rights under the current relationship, while Remaining under the EU’s jurisdiction.

    • Simeon
      Posted December 20, 2019 at 10:21 am | Permalink

      There is necessity though, after BJ explicitly campaigned on getting Brexit done by these very means. I know he’s a BFL, but there is generally an understanding that there are things he says that are intended to be lies, others that are merely a product of ignorance, and things that describe his true intentions. Surely no one voted Tory expecting the much vaunted ‘great deal’ to be ripped up… 😉

    • NickC
      Posted December 20, 2019 at 8:05 pm | Permalink

      Kevin, You have it precisely right.

  11. Wake up!
    Posted December 20, 2019 at 8:34 am | Permalink

    The main contender as rumoured is not the man. A carbon copy marked BoE. What an outfit! If in this day and age if you don’t expect eavesdropping and don’t look for it then Elvis leave the building.
    If only the Tory party with its aspect of free-enterprise had the ambition in its own context as the Corbyn manifesto had in his then we might make something or ourselves.
    Does every Chancellor look first to having a a run-of-the -mill record, no risks, so as to fulfil an agenda for a future career boost? Yes.
    Well he should be pushed to take risks with a promise to gloss over any potential mistake. otherwise sack him quick and appoint someone younger , much younger, who can afford to make mistakes.

  12. Mick
    Posted December 20, 2019 at 8:54 am | Permalink

    Off topic
    Was listening to snp. Mps and sturgeon yesterday waffling on about how they are equal partners in this relationship with the U.K. and that they should be able to call for another referendum, sorry sturgeon you along with Northern Ireland and Wales are junior partners and you don’t dictate to you bosses in England Westminster what you want, and also sturgeon you are forgetting the fact that we entered the Eu in the 70s as a United Kingdom and not as separate nations , so sturgeon get off your plinth and run Scotland or step down

    • Fred H
      Posted December 20, 2019 at 7:55 pm | Permalink

      Mick – – I think SNP got 1.2m voters……Conservatives got almost 14m.
      Equal partners – what unhinged world does she live in?
      Having said that she has my blessing (impressive eh?) to take them out of our little UK. Just as long as she and the supporters understand we would totally, completely and ruthlessly eliminate any funding, jobs, military, tourism, health service facilities, and educational benefits.
      Haste ye back would never happen from me.

    • NickC
      Posted December 20, 2019 at 8:07 pm | Permalink

      Mick, I think what Ms Sturgeon is aiming for is a hard border between England and Scotland.

  13. Gareth Warren
    Posted December 20, 2019 at 8:56 am | Permalink

    While the BOE has many tools they are all two edged.

    Firstly, every action they take to ease diminishes confidence in Sterling.

    Secondly weakening the currency and reducing interest rates diminishes the ability for people to accumulate capital. There today is too much sterling in the world for our economic size, therefore I want to see the government reduce costs to spur growth.

    Brexit does that, cutting foreign aid does that. Reducing the size of government does that too, mowing the heavy legislation would help too. This last action can be justified politically by pushing freedom of choice and letting people make decisions not government. And pushing science, we can about how polluting something is, that means less waste and clean air should be the regulation for energy, CO2 is fine to breath for plants and animals.

  14. Stred
    Posted December 20, 2019 at 8:57 am | Permalink

    Before the referendum and after, the BoE was forecasting a slump after Brexit or even after voting for it. Now they are not cutting interest rates because they think things will pick up after Brexit or is it Brino. Who knows what Boris is going to do after the signing of the WA and negotiations. My bank wrote yesterday that it is cutting interest rates for savers anyway. Probably because it has few customers to lend to after new treasury rules. I see that asked for house prices are no longer ridiculously high in my neck of the woods. Housing is included in the inflation figures now is it not? Does the BoE take this into account?

  15. Ian Wragg
    Posted December 20, 2019 at 9:01 am | Permalink

    So today the dreadful WA will be rammed through without proper scrutiny.
    The trade negotiations will not be voted on so the coast is clear for a compete sellout.
    £39 billion handed over with no quid pro.
    Just some vague assurances with no substance.
    You have been warned.

    • Simeon
      Posted December 20, 2019 at 10:23 am | Permalink

      Without proper scrutiny sir? They’ve had three and a half years! There’s nothing more to say. It’s time to get Brexit done! 😉

    • Denis Cooper
      Posted December 20, 2019 at 10:44 am | Permalink

      There is no reason why any deal with the EU should not be subject to approval by MPs, and probably by both Houses through an Act for anything major. It is just a matter of MPs insisting that it must happen like that.

      What concerns me more is that we do not want a repetition of Theresa May’s “no running commentary” approach to EU negotiations, where MPs are presented with a finished deal and cannot amend any of it.

      http://johnredwoodsdiary.com/2019/04/11/another-pointless-delay/#comment-1012703

      “An alarm bell rang in September 7th 2016, when she said “… we will not provide a running commentary on every twist and turn of the negotiation …”.

      But apparently pro-Brexit Tory MPs did not hear it – perhaps because they did not want to hear it, they wanted to trust her – and so they did not think:

      “This is what has happened in the past with EU treaties; the government would go off and negotiate and agree a treaty, and then Parliament could not change it, not as much as a comma; we could only take it or leave it as it stood.””

      Instead we need a carefully selected cross-party committee of trusted MPs to be kept fully up to date with the progress of the negotiations, week by week, with access to sensitive information on a strictly confidential basis, and if necessary holding parts of their meetings in camera.

      Perhaps it should be treated as a sub-committee of the Privy Council, with its members required to take that oath of secrecy?

      I said this before Theresa May started her negotiations but it did not happen.

    • old salt
      Posted December 20, 2019 at 11:32 am | Permalink

      Ian Wragg-
      You are not alone in your concerns.
      If we are leaving on 31st January 2020 why all the talk of leaving with no deal in December 2020?

  16. glen cullen
    Posted December 20, 2019 at 9:09 am | Permalink

    There might be a new BoE governor but in more important and rather sad news the HoC are voting through the WA today…..sad because every man and his dog knows its the same as the old TM deal, nothing to be proud about

    • L Jones
      Posted December 20, 2019 at 10:31 am | Permalink

      Mr Cullen – and this despite the worthless ”pledge” on standup4brexit.com – to abandon TM’s WA as ”dead”.

      Perhaps they really DO think we don’t know it’s really a thinly-disguised TM’s ”deal” and that we can be cheated without noticing. Or perhaps that website will be subtly changed – a case of ”four legs good, two legs BETTER”.

      A ”pledge” is supposed to be binding. What price honour, eh?

  17. Caterpillar
    Posted December 20, 2019 at 9:27 am | Permalink

    As Lord Mervyn King pointed out (again) a few months back the problems are structural and global. Monetary easing has kept things ticking over but has not solved the global imbalances (exporting, saving, single reserve currency) – these need to be addressed internationally. The imbalances have not been solved since the GFC. Additionally world debt has increased due to the easing and this remains a fundamental threat – if constraints on banks were reduced then should a recession come along there might be an unstoppable chain.

    I think Mr Javid needs to get in King, Carney and Bailey and chew the fat.

    Another problem of easing has been the increase of wealth inequality, a doubling of a house price in London resulting in a much larger gain than a doubling in the NE. This random allocation of wealth which people then remarkably believe they have earned is problematic (i.e. divisive). Even when those who are fortunate enough to receive this gift when alive believe they should keep it when they die – wealth and inheritance taxes are not all bad.

    If QE is reignited the Corbyn (!!!) view of a people’s QE might be more sound, just call it a national dividend (as the 1920s social creditors would have) and then effective demand will increase. Nonetheless in an importing country (there are the imbalances again) some of the demand will be met from outside. Perhaps the Johnson plan of Govt directing resources to what people democratically want is the way to go e.g. hospitals, public transport (clean, safe, reliable/ with redundancies), rebalancing to the Midlands and North, effective defence, more police (law, order and prison time – without which public transport is not safe and the green agenda is slowed). Efficiency will come back in other areas if UK based resources are taken up by above (obviously if capacity is imported by purchasing from abroad or through immigration this won’t happen and world imbalances will continue). As an aside I think the opportunity should be taken to fund hydrogen generation from methane – when the fracking restarts it can be used, and to insist that all future EV batteries in UK are recyclable in the UK.

    [All the above said, the fundamental financial and tax systems need changing … Hmmm and the model of health].

  18. Lifelogic
    Posted December 20, 2019 at 9:30 am | Permalink

    Indeed plus get some real competition in banking 40% and nearly 80% interest rates at major banks (on all personal overdrafts) is a clear sign there is none. The regulation discriminating against lending to landlords, the absurdly restrictive stress testing and capital/slotting rules are also very damaging as it the outrageous taxation of landlords or “profits” not even made. This can result in tax rates of well over 100%.

    Then we have the absurdly high stamp duty rates too which, one assumes were, Hammond and Osborne’s idiotic way to give us the drop in house prices that Carney predicted.

    Andrew Bailey is an insider and a Cambridge history graduate it seems (at least it is not Oxford PPE), let us hope he has not been too infected by the idiotic group think at the BoE.

    • Lifelogic
      Posted December 20, 2019 at 9:49 am | Permalink

      Fraser Nelson is surely on the right lines today.

      “This Blue Labour government risks repeating the errors of New Labour
      If the next decade is theirs to shape, the Tories must remember that bold reform works better than cash”

      What is needed above all is far less government, far less red tape, far lower taxes, free markets (especially in health care, energy, transport, banking and education) plus cheap, reliable, non green crap energy. Get the damn state out of the way, it has gone from 10% of GDP to nearly 50% of GDP it should be kept under 20-25% maximum.

  19. Roy Grainger
    Posted December 20, 2019 at 9:35 am | Permalink

    Oh dear John, a very very bad start, Andrew Bailey of the FCA to be the new governor. A reign at the FCA of incompetence, ineffectiveness and inaction (recently over the Woodford scandal) at the FCA rewarded. Incredible.

  20. Denis Cooper
    Posted December 20, 2019 at 9:45 am | Permalink

    Off topic, JR, but coming up soon I imagine, we also need change at the Commons Exiting the European Union Committee, which should no longer be controlled by MPs like Hilary Benn who were determined to stop us exiting the European Union:

    https://www.parliament.uk/business/committees/committees-a-z/commons-select/exiting-the-european-union-committee/news-parliament-2017/2017-membership/

    That is not to say that all critics should be purged from the select committees – apart from anything else about Brexit, Boris Johnson must be made to live up to the promises he has made to Northern Ireland regarding trade with the rest of the UK – but one can be a useful critic without becoming a destructive saboteur.

    When will the select committees be elected?

    • Simeon
      Posted December 20, 2019 at 10:08 am | Permalink

      BJ living up to promises made to N. Ireland would mean breaking promises made to others, most pertinently the EU. Poor BJ. Whatever he does he’ll be breaking promises made…

  21. Grahame ASH
    Posted December 20, 2019 at 10:02 am | Permalink

    Andrew Bailey has been appointed as the next governor of the Bank of England.

    Those who made the appointment are evidently not readers of Private Eye which has been quite scathing about his performance as chief executive of the Financial Conduct Authority (FCA), the City watchdog.

    • Fred H
      Posted December 20, 2019 at 3:14 pm | Permalink

      it has been pretty scathing about Boris and Brexit in general…

  22. bill brown
    Posted December 20, 2019 at 10:24 am | Permalink

    Sir JR

    The Governor made the interventions he believed he had to make to fulfil his job and duties as an independent institution. The fact they were contrary to your belief’s about Brexit does not mean they were more biased than you own views..

    On the forecasts the BOE got it wrong like many others, I would agree.

    • Andy
      Posted December 20, 2019 at 3:47 pm | Permalink

      Actually many of the Bank’s forecasts were pretty good.

      • Fred H
        Posted December 20, 2019 at 7:49 pm | Permalink

        Andy – – examples of the many? 5 will do – I await with interest (boom boom).

      • NickC
        Posted December 20, 2019 at 8:15 pm | Permalink

        Like??

    • libertarian
      Posted December 20, 2019 at 7:03 pm | Permalink

      bill hans brown

      Well in meeting after meeting I told BoE economists they were wrong about their unemployment forecasts, they ignored me. Turned out I was right they were wrong. Maybe it would pay them to get out from behind their spreadsheets and talk to people in the real world, with real world expertise

  23. Newmania
    Posted December 20, 2019 at 10:33 am | Permalink

    UK rates are considerably lower than the Fed and at 0.75 % remain at a historic low. Mr Carney took prompt action to avert the recession he predicted ceterus paribus and was rewarded by John Redwood and his endless aggrieved Brexit whingers attacking him for dissing Brexit. Typical
    The Phillips curve charts inflation against employment as co-factors of demand . With full ( albeit insecure and often poor) employment and inflation about on target I can`t see any argument for even more anti recessionary measures at this stage
    There is a short term political desire to cover the drag on growth investment and activity caused by Brexit and allow the Brexit State to play the good fairy by magicking up some give aways from a consumer bubble.
    This is precisely the sort of irresponsible self serving motives an independent bank is supposed to be independent of.

    • NickC
      Posted December 20, 2019 at 8:31 pm | Permalink

      Newmania, Ooh look, there’s a squirrel. Actually, the UK economy is not the USA economy so the UK bank rate is likely to be different anyway. The issue is what direction are central banks moving in. Or do you think everyone else is out of step other than the BoE?

      If Carney’s “prompt action to avert the recession he predicted” really was sufficient to stave off the supposedly bad effects of Brexit, then those bad effects could not have been that bad. You cannot have it both ways.

      You know as well as I do that it has been the uncertainty, not Brexit itself, which has caused a “drag” on the UK economy. Businesses have had to plan for multiple outcomes; and until they know which outcome they cannot consequently invest. Well, at least you should know that.

  24. Iain Gill
    Posted December 20, 2019 at 10:36 am | Permalink

    not sure the head of the FCA as head of bank of England is a good idea.

    after all as Dom Cummings says the quality of the Financial Services sector regulation is very poor, and he is correct about that.

    and the FCA has allowed poor performance of the Financial Ombudsman Service over prolonged periods, as well as outrageous conduct by a number of financial organisations that I know they know about first hand.

    sounds like a revolving door of the same people with the same self promotion and “dont rock the boat” tendencies, and lack of heads down change agent and delivery skills.

    this is not the best we can do.

  25. DavidJ
    Posted December 20, 2019 at 3:52 pm | Permalink

    Thank goodness Carney is on his way, hopefully back to Canada, never to return. Let’s hope that his replacement is a native Brit who has an interest in the well being of our country rather than supporting the globalists and doin gas they instruct.

  26. acorn
    Posted December 20, 2019 at 4:42 pm | Permalink

    There is a lot of neo-liberal nonsense talked about Central Banks (CB). In an economy that issues its own fiat currency, the currency issuing Treasury and its own Central Bank are one and the same. In reality, there is no such thing as an independent Central Bank in a sovereign fiat currency economy.

    The BoE would never pass the stress test it imposes on private sector Banks. The BoE has very little capital and reserves to cover bad debts, far far less than any private sector Bank. BUT, that does not matter, its owner, the UK Treasury, can supply it with an unlimited amount of Pounds Sterling if it so requires.

    The BoE has not bought £435 billion of government bonds under QE, it has just swapped them back into the Treasury issued cash that bought those bonds originally. It just moves the money from the Treasury securities account at the BoE to the Treasury “reserves” (cash) account.

    The BoE doesn’t have any money to buy non-government assets under QE. Hence, it has only bought £10 billion of corporate bonds out of its petty cash. The Treasury would have to finance the outright purchase of private sector debt by the BoE.

    Central Banks are a relic from the Gold Standard days; the last decade has proved that “monetary” policies (interest rates) are slow to act and nowhere near as effective as “fiscal” policies (deficit spending) at boosting an economy.

    The biggy is; citizens have to be confident in spending Treasury fiscal injections, boosting the demand side of the economy. If they are frightened for the future, they will just save it and automatically increase the so called “national debt”.

  • 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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