Mr Carney’s speech

This week the outgoing Governor of the Bank of England gave a speech which was read as dovish and temporarily drove the pound down. He set out how despite low interest rates the Bank could if necessary ease money policy more. He did not encompass all of the ways in which the Bank could ease but was right about the possibility and the general magnitude of flexibility left in the system.

There were two glaring omissions from the speech. There was no detailed examination of the worldwide Central Bank moves to ease over the last few months, as practically every other Central Bank has joined the necessary move to stop the global slowdown and stimulate growth. China has lowered commercial bank capital requirements and brought forward local authority borrowing. The Fed has cut interest rates three times and pumped money in at the short end. The ECB has resumed Quantitative easing. Brazil, Turkey, Australia, New Zealand, India and many others have cut rates. The UK has done nothing and has ignored the slowdown.

The second is he did not refer to the substantial tightening the Bank has carried out . Contrary to the global trend the Bank has just doubled the countercyclical buffers restricting commercial bank lending. Its words and actions have until Mr Carney spoke this week helped boost the pound, in itself a monetary tightening.

I ask why the Governor did not comment openly on these moves and explain the different path the UK has taken. I think he should seek to justify the tough policy being followed and tell us how this affects growth. He should understand and explain the FPC and MPC interactions and the significance of balance sheet moves by both the Central bank and the commercial banks to money conditions and to economic growth. It looks as if the Bank has yet again misjudged the situation. He talks too much about  alleged Brexit impacts and not enough about the global and domestic policy influences on price and output which are dominant as elsewhere in the world.

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85 Comments

  1. Peter Wood
    Posted January 12, 2020 at 5:40 am | Permalink

    Good Morning,

    I disagree, monetary policy, worldwide, is now ineffective. NEGATIVE rates in the EU should confirm that, along with QE 4(?) in the USA but still the order books are shrinking. No, the economic downturn is more profound than can be resolved simply by cutting rates or pumping more cash into the system. Western nations now exist on borrowed money, that they hope their populations won’t mind when their savings get inflated away. We will have hard times ahead.

    • acorn
      Posted January 12, 2020 at 8:42 am | Permalink

      Central Bank momentary controls are ineffective at low interest rates and it is pointless blaming them for a decade of austerity that has shrunk the productive capacity of the nation.

      The UK is in a Brexit inspired liquidity trap. Nobody knows where the pound is going or if interest rates will get jerked up to defend it. Why save or invest in anything that will suffer capital losses if interest rates go up.

      • NickC
        Posted January 12, 2020 at 1:53 pm | Permalink

        Acorn, Your comment is almost totally incoherent. There is no connection between a supposed “decade” of “austerity” and your claimed “Brexit inspired” liquidity trap. Greece had real austerity imposed on it. By your EU empire.

        The (relative) lack of investment, and liquidity problems, have been caused by two main factors. One is China injecting massive deflation into the global economy. The other is fear of continuing recession stemming from the bank crash of 2008 ultimately caused by Clinton beefing up the CRA.

        • Martin in Cardiff
          Posted January 12, 2020 at 8:47 pm | Permalink

          The Right claim that Greece’s problems were caused by a particularly Mediterranean form of socialism.

          So, do you think that the European Union institutions should lend the good taxpayer’s money to such a country, without asking for some evidence of an intention to acquire the capacity to repay it then? The Greeks could always have refused it.

          Make up what passes for your minds, do.

          • Edward2
            Posted January 13, 2020 at 7:59 am | Permalink

            Is that what the right claims Martin or what you have just made up?
            Greece suffers from a currency that has a value set by Germany.
            If it had it’s own currency it would float downwards and ease the situation.
            I notice you didn’t use the austerity word as it is the EU and there is no austerity in the EU is there..
            PS
            I note you are returning to adding a bit of personal abuse in your posts.
            No need..

          • NickC
            Posted January 13, 2020 at 3:30 pm | Permalink

            Martin, Greece should leave the Euro, to escape the vindictive EU’s austerity and bad management stemming from the inappropriate EMU.

        • acorn
          Posted January 13, 2020 at 7:15 am | Permalink

          The outgoing governor told the Financial Times that the global economy is heading towards a “liquidity trap” that would undermine central banks’ efforts to avoid a future recession.

          A global liquidity trap occurs when central banks lose all effectiveness to manage the economy because demand is weak and looser policy does not encourage any additional spending. FT.

          • NickC
            Posted January 13, 2020 at 3:26 pm | Permalink

            Acorn, Global, not UK as you claimed. Global, not “Brexit inspired” as you claimed. You can’t even agree with yourself.

        • acorn
          Posted January 13, 2020 at 4:33 pm | Permalink

          The US Community Reinvestment Act (CRA) was responsible for a small percentage of subprime mortgages that went bad, causing the 2008 crash. The rest of your comment is so naive it doesn’t warrant a reply.

    • Mark B
      Posted January 12, 2020 at 9:10 am | Permalink

      After the wild party comes the hangover. Their solution ? More mad self indulgence.

  2. Lifelogic
    Posted January 12, 2020 at 6:00 am | Permalink

    Indeed Osborne and Hammond’s very expensive choice to head up BoE has been a disaster and wrong on almost everything plus he is full of deluded climate alarmist drivel too.

    Now we have a new (£500k PA) chap coming from the FCA which has apparently recently driven or encouraged HSBC to charge 40% on all personal overdrafts and Lloyd’s nearly double that. It is hardly very encouraging. Margins, fees and terms from banks have been tightened far too much.

    Get some real competition going in banking they are currently taking the p*** with 0.2% on deposits and 200 times that on overdraft rates. This actually encourage by the deluded FCA it seems! HSBC also tell me they no longer lend on commercial property unless the lend is several million as the red tape makes it more trouble than it is worth. Why? This is hardly sensible If we want jobs, growth and a sound economy.

    • Lifelogic
      Posted January 12, 2020 at 6:10 am | Permalink

      The new BoE chap read history at Queen’s, it seems he knows something about:- The impact of the Napoleonic Wars on the development of the cotton industry in Lancashire: a study of the structure and behaviour of firms during the Industrial Revolution. A shame he did not read maths, engineering or physics.

      What is his view on these 40% and nearly 80% one size for all bank overdraft rates? Did he actually encourage them or did he just not know what the FCA was up to? If so why not? Does he really think good credit risks should pay the same interest rate as bad ones. If so he is surely a complete idiot and totally the wrong person for a banking job.

      • Lifelogic
        Posted January 12, 2020 at 7:14 am | Permalink

        Queens’ Cambridge I meant.

      • Stred
        Posted January 12, 2020 at 9:02 am | Permalink

        The new bloke was running the FCA or overseeing it. How do they pick them?

        • Stred
          Posted January 12, 2020 at 9:04 am | Permalink

          Sorry. Didn’t see your multiple post.

      • Leaver
        Posted January 12, 2020 at 4:59 pm | Permalink

        Lifelogic, you keep going on about the importance of maths, engineering and physics. All of which are about looking at data objectively.

        You then follow up by going on about ‘climate alarmist drivel’ which the vast majority of mathematicians, engineers and physicists regard as a serious problem – because they have looked at the data objectively.

        Do you not see the irony of what you are saying?

        • dixie
          Posted January 12, 2020 at 6:41 pm | Permalink

          How do you know it’s a majority in STEM fields who support the notion of AGW?

          • Leaver
            Posted January 13, 2020 at 12:45 pm | Permalink

            Because they look at evidence. It’s part of their training. Also I know a lot of them, and every one believes climate change is manmade and a serious threat.

            The only people I know who don’t believe in man-made climate change are U.S Republicans and right-wingers – but this seems to be a political position about hating tree-hugging lefties, not a scientific one.

          • Lifelogic
            Posted January 13, 2020 at 9:06 pm | Permalink

            97% of scientists (the alarmists claim) believe in “climate change” and that man’s activity has an effect on climate. But who does not think that? – I certainly do as do most climate realists.

            But that does not mean it is remotely sensible to spend billions trying to reduce C02 and that climate Armageddon is just round the corner. Co2 concentration is not some world temperature thermostat. It would be moronic to think that. Even if “flat earth” Obama (law), Ed Miliband (PPE) & Lord Debden (history) idiotically thinks so.

          • dixie
            Posted January 14, 2020 at 7:24 am | Permalink

            Where is your substantiated evidence for the claim that the majority in STEM fields support the notion of AGW being the cause of climate change

        • Wil Pretty
          Posted January 12, 2020 at 7:16 pm | Permalink

          Climate Science may be a rewarding career for some mathematicians and physicists.
          However any engineer would view the topic as speculative as there is insufficient understanding and data for there to be any possibility of anything other than crude guestimates of policy changes.
          If you look at any analysis of the topic, they are full of could’s, might’s, etc.

          • Martin in Cardiff
            Posted January 13, 2020 at 8:11 am | Permalink

            An engineer would also apply the Precautionary Principle however.

          • Leaver
            Posted January 13, 2020 at 12:51 pm | Permalink

            Er … I think you are confusing the issue here.

            There is no ‘could’ or ‘might’ when it comes to reports on human activity leading to climate change.

            There is a lot of could and might about trying to predict the precise effects – as trying to model the world’s climate is very difficult indeed. Indeed, I have a lot of issues with people making pronouncements about future effects. But that is a different matter.

          • Lifelogic
            Posted January 13, 2020 at 8:52 pm | Permalink

            It you are not sure if the temperature will rise or fall then how exactly does one apply the precautionary principle?

    • acorn
      Posted January 12, 2020 at 7:59 am | Permalink

      Banks have no need to offer higher interest rates, they have all the capital reserves they require from retail deposits.

    • Nig l
      Posted January 12, 2020 at 8:52 am | Permalink

      Please give it a rest. Many people are paying less for their OD because of the removal of the fee aspect. The changes were as a result of commission findings that previous charges were opaque and unfair and misleading. My chunky unsecured OD has just been renewed by HSBC at 5.75%

      I hope the new governor has better things to worry about.

      • Lifelogic
        Posted January 12, 2020 at 12:21 pm | Permalink

        I assume that is a business overdraft as all personal ones from mid march are going to be at 39.9%. If the bank charges the same interest rate for high risk and low risk client it is very clear operating as a free market with any real competition. It is another form of tax on the responsible to subsidise the feckless.

        Where is the competition authority?

      • Lifelogic
        Posted January 12, 2020 at 12:36 pm | Permalink

        Even 5.75% is rather a rip off anyway when they are only paying 0.2% on deposits 28 times what they pay depositors. Unless you are a high risk client for some reason that is. Mine was initially base plus 2.5% when I first took it out and now they want 40% and now I am a far, far lower risk than then. It is clearly not fair competition. Not that I will use the facility it at such absurd rates.

    • Lifelogic
      Posted January 12, 2020 at 1:36 pm | Permalink

      Time to derail the HS2 crony capitalism says Liam Halligan in the Telegraph.

      Far,far past time, they have already wasted nearly £10 billion, inconvenience very many people and businesses and blighted large areas of the country.

  3. Garland
    Posted January 12, 2020 at 6:10 am | Permalink

    Of course you don’t want the highly respected governor of the Bank of England to talk about what harm Brexit is doing and will do to the UK economy, you want to shut him up! Well – tough! Those, like Mr Carney, who have explained all along how damaging Brexit is, and who are now being proved right as investment in the Uk drops and jobs move overseas, are going to keep making very clear whose fault it is – the Brexiters who told us fairy stories. You are not going to silence your critics Mr Redwood, you are going to be held to account for this Brexit fiasco, even more so this year as your predictions of a quick and easy deal with the EU and the US are shown up as false. It’s going to be a bumpy ride for the supporters of Brexit as the truth emerges

    Reply Nonsense. It is not Brexit which has slowed the economy but fiscal and monetary policy whilst we are still fully in the EU!

    • Lifelogic
      Posted January 12, 2020 at 7:10 am | Permalink

      Garland this is totally wrong. What is holding the economy back is the fiscal and monetary policy, plus the total lack of vision, the expensive energy policy, the May incompetence, duplicity and dithering, the endless red tape, the bloated size of the state, the very restrictive employment laws, the appalling prospect of Corbyn (until a few weeks back). Let us hope Boris, Javid and the BoE chap are not more of the same tax borrow and piss down the drain types that we have suffered from ever since John ERM Major become a truly appalling Chancellor.

      The signs so far are not very encouraging. We will know for sure in the March budget but why not indicate a sensible smaller government, lower taxes, pro growth direction of travel now – so as to encourage investment now? Just undo all the damage and tax increases inflicted on us by Hammond, Osborne, Darling, Brown and their ilk.

      The millions of £50k student debts and thee years loss of earning,, for mainly worthless degrees, does not help much either.

    • Lifelogic
      Posted January 12, 2020 at 7:12 am | Permalink

      Highly respected? Only by economic illiterates, climate alarmists, proponents of big government and the dire remoaners. Oxford PPE needless to say.

    • Robert McDonald
      Posted January 12, 2020 at 10:14 am | Permalink

      As Mr Redwood points out, nonsense .. particularly the spin that jobs are moving overseas .. unemployment lower than it has been for decades, despite the eu funding relocation of our manufacturing to other nations .. the prime and unforgivable example is the relocation of Ford Transit from Southampton to TURKEY funded by the eu. There are a number of other examples that prove how destructive being in the eu has been to our economy.

    • Ian Wragg
      Posted January 12, 2020 at 11:17 am | Permalink

      Carney wants to do as much damage as possible before handing over to another financial incompetent.
      I’m surprised we didn’t restrict applications to the LGBT and BAME candidates.
      I see the MOD has been lit up to celebrate diversity.
      I hope we never have serious war.

  4. agricola
    Posted January 12, 2020 at 6:41 am | Permalink

    What Mark Carney and his advisors and Chancellor have done is history. WW1 if you like, the new Chancellor, Govenor and Treasury must prepare the ground for WW2. An event we discovered was totally unlike any previous wars. So it will be for the UK once Brexit is achieved. We will get first indications in the February Budget. I hope our financial institutions can rise to the challenge.

    • Nig l
      Posted January 12, 2020 at 8:56 am | Permalink

      Totally agree and in any event surely Carney was in league with the Treasury so JR seeking to solely blame him is misleading.

    • Martin in Cardiff
      Posted January 12, 2020 at 9:56 am | Permalink

      Normal people prefer peace.

      • Martin in Cardiff
        Posted January 12, 2020 at 9:57 am | Permalink

        …especially with very decent friends.

        • Fred H
          Posted January 12, 2020 at 10:35 am | Permalink

          if you wish for EU friends like the ones shown in videos during the ‘negotiations’ you are welcome. You deserve each other!

          • Martin in Cardiff
            Posted January 12, 2020 at 1:54 pm | Permalink

            Good luck with Trump’s US.

            Even-handed extradition treaty, anyone?

          • Fred H
            Posted January 12, 2020 at 8:03 pm | Permalink

            You know full well the US have behaved like that for all countries- for ever. Everything the US does is for US benefit, believing anything else is foolish. But a nice try from you to change the subject.

          • Edward2
            Posted January 12, 2020 at 8:39 pm | Permalink

            Another of Blair’s mistakes.

          • Martin in Cardiff
            Posted January 13, 2020 at 8:24 am | Permalink

            Thank you for reinforcing my point, Fred.

      • agricola
        Posted January 12, 2020 at 12:31 pm | Permalink

        Have you not experienced a metaphor before.

        • Martin in Cardiff
          Posted January 12, 2020 at 8:50 pm | Permalink

          I was continuing it.

          Do you understand the proper use of question marks?

    • NickC
      Posted January 12, 2020 at 2:06 pm | Permalink

      Agricola, The UK does not leave the EU on 31 Jan 2020. The UK abrogates the existing treaties (TEU, TFEU, Euratom) and replaces them with a new agreement – the EUWA Treaty – which ensures continuity of EU control over us. Then we may, if we are lucky, escape from our EU enemy on 31 Dec 2020, provided Boris does not crumble again.

      • L Jones
        Posted January 12, 2020 at 9:50 pm | Permalink

        Yes, NickC. Many people see things in the way you describe. There is understandable euphoria. People WANT and need to look forward with hope. But it’s felt generally that ”BJ’s WA” is the same old same old. With a few knobs removed.

  5. Frankh
    Posted January 12, 2020 at 7:42 am | Permalink

    Same old same old!- still having a go at Carney- we have not yet left and am now reading in Bloomberg where we have already lost over 100 billion because of this brexit madness- Carney & CO are right to be concerned.

    • NickC
      Posted January 12, 2020 at 2:18 pm | Permalink

      FrankH, That is mere argument from authority, but without evidence. Actually Bloomberg claimed (14 Dec) that there has been an outflow from European stock funds of $100bn. European funds can go up, or down. Didn’t you know? That is not the UK. And it was not Brexit, it was the uncertainty combined with other global concerns. Otherwise the stocks would not have bounced when Boris got elected, but before Brexit.

  6. Bob Dixon
    Posted January 12, 2020 at 7:52 am | Permalink

    Boris has been busy moving mountains.The Northern Ireland Assembly has reconvened. Brexit will start its journey into the history books.The UK will have its chance to spring free
    into the real world.
    The Bank of England has 11 months to join the party.Carny will be using his skills elsewhere.
    Will the BOE be able to step up to the plate?

  7. Fred H
    Posted January 12, 2020 at 8:28 am | Permalink

    ‘I ask why the Governor did not comment openly on these moves’

    Political, incompetent, or plain wrong?

  8. Lifelogic
    Posted January 12, 2020 at 8:58 am | Permalink

    Are the blue-collar Tories now a tax-and-spend party? Ponders Daniel Hannan in today’s Telegraph.

    Well the Tories have been this for most of my life. But more tax borrow and waste than a tax and spend. Let us hope Boris will turn this round for once. Thatcher won three elections (effectively four with Major as her very foolishly chosen replacement until the electorate sussed him out). This largely by cutting taxes and restricting tape, albeit far from sufficiently. Since then taxes and red tape has gone up and up and up. This while public services have largely declined.

    She also encouraged private health care with tax breaks to lower the pressure on the NHS and other sensible policies.

    Even if she did fall for climate alarmism and close many grammar schools.

  9. Johnny Dubb
    Posted January 12, 2020 at 9:08 am | Permalink

    Might as well have had Prince Harry in charge. Good riddance.
    A waffler from day one, over promoted, who morphed into a convenient EU stooge, encouraged to stay on by Hammond “to guide us through Brexit”. Oh, thank you! I know that you will keep a close eye on the new Governor. Didn’t know that, like Osborne, he read history. Too late to read economics. He can though, read Redwood or Ruth Lea if he gets stuck. Let’s give him a chance but not hang about too long if he is Carney cont.

    • Ian Wragg
      Posted January 12, 2020 at 11:20 am | Permalink

      First qualification for senior government posts, a degree in stupidity.

      • Martin in Cardiff
        Posted January 12, 2020 at 1:56 pm | Permalink

        Are you going to excuse your kind host, by describing Welsh Secretary as a junior post, then?

  10. Mark B
    Posted January 12, 2020 at 9:08 am | Permalink

    Good morning.

    Again I find our kind host asking the BoE to help the government out. If our kind host wants to see growth then he must look to his friend the Chancellor. The USA has cut taxes which has stimulated growth. The UK Government does not want to do this as this will mean less money coming in for them to spend and waste. They will not cut the overseas aid budget and will not cancel or cost limit on projects such as HS2. They are wedded on big nanny state ideals and projects as this benefits corporates at the expense of SME’s. Large minimum wage rises mean employers are less likely to invest and create more jobs.

    I know our kind host has talked about what he would like to see from the government, but we need to know what this, One Nation Tory government tends to do ?

    • NickC
      Posted January 12, 2020 at 2:25 pm | Permalink

      Mark B, Exactly right. I am dreading the government’s intentions of “investing in the North”. That appears to be code for resurrecting the useless regional quangos and sprinkling money on them. Far better to have personal taxes reduced than that.

    • Bob
      Posted January 12, 2020 at 3:46 pm | Permalink

      “The USA has cut taxes which has stimulated growth. The UK Government does not want to do this as this will mean less money coming in…”

      It doesn’t necessarily mean less money coming in, it could mean more money coming in. #LafferCurve

      • Lifelogic
        Posted January 12, 2020 at 7:20 pm | Permalink

        Indeed, 25% of a large GDP can be more than 50% of a small one. Cutting red tape and daft regulations is a win, win it cost nothing in lost revenue and increases the tax base and investment hugely.

  11. Stred
    Posted January 12, 2020 at 9:10 am | Permalink

    The forthcoming green agenda, which is being implemented by ignorant local councillors, will have an even worse effect on the economy. It is already destroying the car industry for no discernible health benefits.

    • Fred H
      Posted January 12, 2020 at 12:23 pm | Permalink

      Stred – – local councils have done their bit to destroy the usefulness of cars, making a cost burden of parking. If only I had invested in carparks, car-parking machines or fine administration software years ago!

  12. Gareth Warren
    Posted January 12, 2020 at 9:45 am | Permalink

    On one hand I am happy with the UK economy, it is creating prosperity, yet this is complacency as if the Victorians had said “everything is great now” we would still be living in a world driven by horses.

    I suspect there is a lot of complacency due to low targets at the BOE today, there also seems to be inaction over brexit. As somene who believes in brexit I still expect it to cause some difficulties as companies move to non-EU suppliers.

    This seems a great excuse to have a period of easier lending so companies can borrow for the new future, instead the BOE seems only concerned with avoiding another 2008 crash. Lets hope the next BOE governor is more ambitious.

  13. Kevin
    Posted January 12, 2020 at 9:53 am | Permalink

    In a Brexit Party video dated shortly before the election, Nigel Farage described being shown, by Cornish fishermen, the shoals of “hundreds of thousands…it may even be millions” of bluefin tuna that have, he says, over the past four or five years, become part of what we have in the south-west. He quotes an “average value at market of £12,000 to £15,000” (per fish, it seems), yet he said that the commercial quota catch for blufein tuna in the UK is zero, whereas the French and Spanish quotas had been increased in the year from 18,000 to 23,500 tonnes (I assume he meant metric rather than imperial tons). Cornwall, he said, is one of our poorest counties. Mr. Farage is talking here about real local growth, not “pumping money” into the economy, yet he has argued that Clause 72 of the Conservative Party’s Political Declaration will effectively keep us in the Common Fisheries Policy. What does the Conservative Party have to say in response to this?

    • NickC
      Posted January 12, 2020 at 2:30 pm | Permalink

      Kevin, The Conservatives will have nothing to say about yours, and Farage’s, suggestion. They have a rigid “not-invented-here” syndrome to direct suggestions and only pinch policies off UKIP when they can pretend they thought of it first.

    • Everhopeful
      Posted January 12, 2020 at 3:12 pm | Permalink

      The reason the bf tuna are off Cornwall is because of Atlantic Multidecadal Oscillation. (🙀)
      This makes them move north leaving behind their usual spawning grounds ( and where they are fished and eaten!). Our govt has made it illegal to catch them except for tagging because overall the species is probably declining.
      As usual …WE are expected to save the world while everyone else dines on tuna!!

      • Mitchel
        Posted January 13, 2020 at 10:41 am | Permalink

        In the far east,colonies of a type of squid that the Japanese are particularly partial to have moved north into Russian waters,apparently due to climate change.The Japanese have had to seek permits from the Russians to continue fishing for them.

    • forthurst
      Posted January 12, 2020 at 5:46 pm | Permalink

      As JR said “We need to take back control of our fish. They should not be offered up as a further sacrifice to secure a Free Trade Agreement.”

      If anybody ever had any doubt before that the EU was a French racket and we were never intended to be beneficieries of it, they would have difficulty arguing the contrary now.

      Our fish are particularly at risk because those who support the Tories with large donations are never likely to be fishermen or farmers. Even if they liked hard work, they probably have not evolved over milenia the stubby hands and peripheral circulation adaption that enables Englishmen to work in the cold and wet in the depths of winter.

  14. Derek Henry
    Posted January 12, 2020 at 9:55 am | Permalink

    Unfortunately, The claim by mainstream economists that the lower interest rates will boost spending is deeply flawed John.

    It should be debated and looked at again. Japan has done this for years and the ECB and suffer from deflation and failed to hit their target.

    So shouldn’t we all say stop let’s take a look at this?

    Infact, when you study the real data it looks like the opposite of what central bankers say will happen is what actually happens.

    1. When you increase rates you increase the cost of borrowing. Thus business just passed on that cost via higher prices. Then you have the interest income channels who receive more interest as rates rise. The bigger the debt to GDP ratio The larger the effect. All of that is inflationary.

    2. When you cut interest rates the interest income channels get less.

    The problem is that peoples’ and firms’ borrowing behaviour is not driven solely by the cost of funds. The mainstream macroeconomic models all believe so-called substitution or relative price effects are large – so they predict that when interest rates fall, total spending will rise because the cost of funds is lower.

    But reality intervenes, always. Reality is driven by more than relative prices. Psychology is important.

    At a time when the outlook is decidedly uncertain, real wages growth is barely positive if at all, households are carrying massive debt levels and desperately trying to save, unemployment and underemployment is rising – it is highly unlikely that there will be an outpouring of spending.

    Fiscal policy has to work hand in glove with monetary policy for it to be effective.

  15. William Long
    Posted January 12, 2020 at 10:08 am | Permalink

    Happily, Carney, like Osborne and Hammond is rapidly becoming ‘Yesterday’s man’. I do not regard anything he now has to say as relevant for the future. It is up to someone else to undo the damage that the Bank ion Carney’s hands has done. I am putting any hope I have in the hands of the incoming Governor and awaiting the Budget with a great deal of interest.

    • Martin in Cardiff
      Posted January 13, 2020 at 11:30 am | Permalink

      I think that Mr. Carney is younger than the average age of a Leave voter, who is also likely to be retired.

      So perhaps he has more of a future ahead of him than they do?

      • NickC
        Posted January 14, 2020 at 12:25 pm | Permalink

        Martin, What do you mean by average? And where do you get your average age figures from? The median age is fairly useless because all ages voted leave. The weighted sample sizes of males and females used by YouGov in their post Referendum analysis were 4003 at 18 years to 64 years, and 1120 at 65+. So clearly the old age pensioners that you and Andy love to hate are only about 22% of the total of voters sampled. YouGov may not be accurate, but you just make things up.

  16. Javelin
    Posted January 12, 2020 at 10:17 am | Permalink

    Perhaps he wanted to reduce commercial lending to make sure the economy did not grow.

    Perhaps he thinks there is wage inflation. Perhaps he just wanted to scupper Brexit.

  17. Everhopeful
    Posted January 12, 2020 at 10:49 am | Permalink

    Head of B o E is head of committee that decides interest rates…the person who has the most influence over the value of sterling.
    How odd then that said person should ever be allowed to say anything in public.
    Post dovish speech minute scrutiny is already leading to expectations of rate lowering….sterling “lost ground”.
    What a game. Remember all the signals he gave that rates were going up?

    • Everhopeful
      Posted January 12, 2020 at 11:06 am | Permalink

      Oh..I do believe that Canada moved away from industry in favour of building condos.
      Very convenient to have low interest rates for flogging nasty, expensive new build when there are older houses on the market that just can’t be sold.
      Pay off your mortgage age 95?

  18. British Spy
    Posted January 12, 2020 at 11:41 am | Permalink

    NOT appear to know

  19. MeSET
    Posted January 12, 2020 at 12:14 pm | Permalink

    Sorry JR. I think aloud best ongoing if I write it immediately on here. Reason(?)
    I shall write it on here in future but not press Post Comment which, to my troubled mind actually seems more sane 🙂

    • L Jones
      Posted January 12, 2020 at 8:11 pm | Permalink

      MeSET – It’s incomprehensible why our kind host allows comments such as yours to pass his moderation. It’s surely ridiculous, and nothing less than gobbledegook.
      Why allow it, Sir John, at the expense of interesting stuff?

  20. Jack Falstaff
    Posted January 12, 2020 at 1:48 pm | Permalink

    I think we should desist from barking down this interest rate-tweaking avenue for as long as the banks persist in blocking the transmission mechanism before any changes to rates reach the consumer.
    As a number of commentators have pointed out, while in many places reference rates are zero-going-negative, the consumer has had to pay rates as high as 30/40/80 percent on consumer loans, mortgage arrears and overdrafts etc.
    The transmission process is dysfunctional and the public are struggling at the limits of what they can give the banks.
    Unless this is addressed, how on earth does anybody expect demand to increase in the real world?
    Add into the mix the ridiculous Basel buffers and mandatory liquidity ratios that banks have to observe because they are “too big to fail”, and the vast quantities of public money that have been used to bail out the banks, and you have a recipe for disaster.
    As far as Mr Carney is concerned, the damage he has really done is through his consistently infelicitous abuse of the messaging he employs as an “economic indicator”. And falsely so: almost unerring in its equivocation and surfeit of gloomstering.
    Tinker all you like with rates, but until the transmission system that might lead to any increase in consumer demand or actual money supply into the real economy is dealt with, then the only way to trigger growth is via the fiscal channel.

  21. DavidJ
    Posted January 12, 2020 at 2:33 pm | Permalink

    The sooner Carney clears off back to Canada the better. No doubt he will be kept around for a while to “brief” his successor. Given his performance that is the last thing we need him to do.

  22. Dennis
    Posted January 12, 2020 at 6:54 pm | Permalink

    If one wants to reorganise the UK and get it going ironing out the absurdities in govt. procedures we could well do with some ideas of Mohammed bin Zayed of the Emirates. What has he done among other things? –

    M.B.Z. deployed a group of young, talented people and authorized them to smash up the bureaucracy. Over the next few years, they fired tens of thousands of employees and reassigned many others, streamlining the state. Between 2005 and 2008, the Abu Dhabi government went from 64,000 people to just 7,000. At the same time, he began harnessing Abu Dhabi’s vast capital reserves to build up a non-oil economy. Using a new sovereign wealth fund called Mubadala, he attracted new industries, creating job opportunities that would help train the local population. He honed his progressive image by including women in his cabinet. Mubadala created an aerospace-and-aviation hub in Al Ain where 86 percent of the workers are women.

    And –

    He made jujitsu compulsory in schools. In 2014 he established the military draft, forcing young Emiratis (couch potatoes due to the sudden oil wealth) — who are granted free housing, education and health care — to endure a year of boot camp and hard work. M.B.Z. made sure they took it seriously.

    • Lifelogic
      Posted January 12, 2020 at 7:22 pm | Permalink

      Between 2005 and 2008, the Abu Dhabi government went from 64,000 people to just 7,000.

      That is a similar ratio to what the UK desperately needs to happen.

  23. DOMINIC
    Posted January 12, 2020 at 8:35 pm | Permalink

    RIP Roger Scruton.

    One of the very few Tories who stood tall when most of the Tory party ran for cover in the face of leftist fascism. His moral strength. His towering intellect. His refusal to crumble under direct threats.

    His bravery has exposed the moral crisis of what is still ludicrously known as the Conservative Party

    The moral bankruptcy of this nation is due to the appalling treachery of the Tory party and their capitulation to the forces of identity politics and progressive oppression

    This government can start the process of re-moralisation of our nation by criminalising the use of the race and misogyny card by the left who take pleasure in trying to destroy lives by slandering decent people

  24. Fred H
    Posted January 12, 2020 at 10:11 pm | Permalink

    OFF TOPIC.

    RIP.
    Conservative philosopher and author Sir Roger Scruton has died aged 75.

    The author of more than 50 books on aesthetics, morality and politics, he was also a government advisor. Supporters hailed him as “the greatest conservative of our age”.

    A statement on his website said he had been fighting cancer for six months and “died peacefully” on Sunday.

  25. MikeP
    Posted January 13, 2020 at 9:14 am | Permalink

    Dear Sir John, these points about the BoE being out of line with other Central Banks have been well made and frequently aired. Should we assume that the Chancellor reads your blog or is always present in the Commons when you speak, or do you make formal separate representations to him in writing? If so, are they a matter of public record as your points seem to be falling on deaf ears?

    Reply These are all published public comments. I do not send him daily letters.

  26. shout4monetaryreform
    Posted January 13, 2020 at 1:30 pm | Permalink

    Sorry, but do you speak of “tightening” when interest rates have been at record low and the market for savers practically destroyed? A full decade of quantitative easing has lead to asset price inflation (stock market, housing). There is not a liquidity gap, but money pours into said 2 channels. Japan from the 1990s onward is the template I would expect for years to come unless the monetary system is reformed.

  • 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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