An independent Central Bank

I read various bizarre articles defending the Bank of England’s independence against an imaginary threat from Liz Truss. I only know what she has said in public, where she issued no threat to Bank independence. She said she favoured a review of the Bank’s mandate to see if it met best standards in the world of independent Central Banks, and to find out what can be learned from the Bank’s failure to forecast or prevent the high inflation we now suffer. The inference was she wanted a tougher Bank,  not a Bank that printed more money and artificially depressed interest rates to suit the government.

The articles are bizarre because they always ignore the radical change to Bank policy launched by Mr Brown and Mr Darling and continued by all subsequent PMs and Chancellors. They agreed with the Bank a policy of creating more money and buying up state debt to keep rates down. Right from their start of this policy it has been a dual control policy, with the Bank needing the consent of the Chancellor and requiring a full Treasury guarantee or underwriting of the transactions. As this policy has dominated money policy between 2008 and 2021 we cannot say the Bank was then genuinely independent. It does have and did have throughout the sole power to fix the official interest rate. No-one in this debate is recommending taking that power away.

Going forward I would like to see the Bank introduce quantity of money and circulation of money as important information to monitor and take into account when settling interest rates. It has proved difficult to control inflation whilst allowing a large increase in the money supply triggered by substantial Quantitative easing. The Bank may not want to go back to strict money targets that were used in the early 1980s to end the last big inflation, but monitoring money and showing an awareness of its importance might  help them  make better calls. The current money figures show they have  now reined things in considerably. They do not need to overdo the tightening from here to make the opposite error to being too loose as they were in the previous two years. The IMF does usually call for monetary discipline when it puts in a recovery programme for a state that needs financial help.


  1. Mark B
    September 3, 2022

    Good morning.

    The BoE Governor should be appointed by someone, or HoC and or HoL committee who is/are not part of the government. Just as we do with the appointment of Judges, QC and Barristers to keep them from from political interference.

    We also must do what the Swiss do when it comes to our currency. The Swiss value their currency, whilst we debase it at every opportunity.

    We need to have parts of the State that are unafraid when speaking truth to power and better economic oversight of the government. The Opposition are useless.

    1. Lifelogic
      September 3, 2022

      Certainly Osborne’s choice of Carney was idiotic but almost everything he did was idiotic and how on earth did Andrew Bailey get the job at both the FCA and BoE when he is clearly totally unsuitable?

      1. Richard1
        September 3, 2022

        Bailey was a very poor appointment. An example of a public sector figure who floats from one senior position to another despite repeated failures. Our Christine lagarde.

        Apparently he can’t be removed.

        1. Hope
          September 3, 2022

          Osborne and his party use to talk about sound money and that there is no magic money tree. It strikes me none of the Tory chancellors over 12 years had any intention to implement that. Remember the balanced structural deficit by 2015, the. 2017, 2018, 2021 then abandoned!

          It was more important for all the Tories for virtual signalling to borrow or print to give away at high cost to the UK taxpayer. They did not care how the money was obtained as long as they could spend and waste it.

      2. graham1946
        September 3, 2022

        Osborne’s choice of austerity has caused most of the problems we have today.

        1. Hope
          September 3, 2022

          Cigarette paper width between what he proposed after Darling’s plan. It looked like a carbon copy accept the rhetoric was different.

          Melvyn King warned the cuts required could prevent the winning party getting in office. Unfortunately the Tories obeyed and never took the drastic action required. They had the blame for something that did not occur on the scale required.

          1. graham1946
            September 4, 2022

            Austerity messed up the services we rely on as a civilisation, but still managed to increase the national debt from around one trillion to two trillion. All wasted and now will cost a fortune to put right.

      3. outsider
        September 3, 2022

        Der Lifelogic, Perhaps Mr Carney’s most overtly political action was to halve Bank Rate to 0.25 per ent after the referendum on the UK leaving the EU. Sterling fell immediately after the vote (uncertainty is bad) . Mr Carney’s action consciously led to a further pro-inflationary fall, affecting ordinary families’ living standards rather than CPI inflation, at a time when the Bank of England should finally have been moving away from post-crash emergency measures. We are still living with the consequences. The most recent fall in sterling shows that the markets do not trust UK monetary policy to have any significant impact on inflation. So fiscal policy alone is responsible both for bearing down on inflation and for supporting the economy in recession, a burden it cannot bear.

    2. PeteB
      September 3, 2022


      Recruitment idea is worth a try, although I fear if you recruit from the same pool you end up with the same sort of frogs.
      Be great to see some real independent thinking in the BoE too – properly split votes on rate decisions would be a start.

      At present we have a lemming leading the rest of the lemmings over the cliff. True in BoE, Civil Service, Regulators and Government.

      1. Mark
        September 3, 2022

        They sacked (or rather Carney did) Haldane who was the free thinker.

    3. Lifelogic
      September 3, 2022

      Indeed all the appalling huge mistakes Boris, Javid, Zahawi, Hancock, Sunak… made (the extended lockdowns, test and trace fiasco, closing schools, HS2, net zero ,frightening people, the failed NHS, mask policy, test and trace, the coercing of fairly ineffective and now clearly dangerous vaccines – even on the young, the bonkers energy policy, the vast (manifesto ratting) tax increases, the intentional currency debasement money printing and vast inflation…) this was all cheered on by Labour and would all have been even worse still under Labour!

      Boris & the “experts” got nearly all the big things wrong but so did Labour/SNP/libdims, Plaid…

      1. Hope
        September 3, 2022


        Your last comment is absolutely baseless and without fact. It is irrational with no substance to support it. Complete drivel. Corbyn was going to spend less!

        As a matter of fact and record Tories hold worse economic record on debt- and in record time- deficit, taxation, worse disposable income, inflation, businesses going bust, mass immigration, illegal immigration, worse public service- in respect of waiting lists and law and order despite a lockdown!

        The record being distinct from the manifesto ratting pledges since 2010 which were clearly lies to get elected like Lothian question, no tax rises, cut number of MPs, make parliament more transparent, community charge freeze, Brexit letter, no border down Irish Sea, no custom checks between GB and NI, no if or buts cast iron promises, bonfire of quangos- JR recently repeatedly blaming them when Cameron was going to set fire to them. However more quangos now than when Tories entered power plus czars and task forces! And Cameron appointed former Labour ministers so JRs party do not agree with you on Labour’s track record or why else did a Tory govt appoint them in preference to former Tory ministers! Cameron even wanted Odonis!

        Todays blog another example of Tory failure to make change over 12 years. JR must accept his party have been utterly useless in govt. Four Tory govt’s copying, imp,ementing and building on Labour policy. It strikes me we do not need Labour in govt. because Tory jump to implement any Labour policy every time Labour floats an idea! No wonder there is no opposition and I feel disinfranchised.

        Reform Party is the only sensible conservative alternative.

    4. Sir Joe Soap
      September 3, 2022

      But the root of the problem has surely been money creation out of thin air.

      It’s created inflation in the US and the UK primarily, and also the EZ. The Swiss did it to keep their currency DOWN, used it to buy equities, Euros and USD I believe, which has served them well. It hasn’t leaked out. The US and EZ have largely circular economies so it hasn’t leaked out. We just threw it at people sitting at home, bureaucrats and other people digging holes and filling them in again who then bought largely imported goods. A crazy and stupid policy which surely leads to a lousy trade balance and ultimately an inflationary and depreciation spiral as nobody wants to hold on to GBP, so it’s like the wallflower at the ball.

      1. Lifelogic
        September 3, 2022

        Surprising that Sunak did not lie like Wilson that this money printing/currency debasement with not “affect the pound in your pocket”!

    5. Mickey Taking
      September 3, 2022

      sorry Mark, but I fell about laughing at:
      ‘the appointment of Judges, QC and Barristers to keep them from political interference.’

      1. Lifelogic
        September 3, 2022


      2. Margaretbj.
        September 3, 2022

        Are you implying that the most objective honest and honourable citizens are less than clean.

        1. Mickey Taking
          September 3, 2022

          how do know they are the most objective honest and honourable citizens?
          Are you serious that the law expounded to get their client off pretty obvious guilt still makes them that?

          1. margaret
            September 8, 2022

            exactly i don’t know one way or another

    6. John
      September 3, 2022

      As far as I can see, inflation is a modest 3.5%/y in Switzerland and 2.6%/y in Japan. I call that relative competence, although maybe they’d both prefer to be near 0.5-1.5%/y (I would, then 8-9% of my state pension wouldn’t have been stolen by this government on the excuse of ending the ‘triple lock’).

      It seems plausible that the ghastly organisations which consider they own and run the world, e.g. (names without evidence supplied Ed)et al are orchestrating economic collapse in order to bring in the Great Reset (aka an attempt at a command-and-control world economy). What could possibly go wrong …?

      Fink of Blackrock did say globalisation was over, if no-one’s heard. The BIS had a major meeting in Aug. 2019 to discuss the problem. Slowly, slowly, others seem to be waking up to what people like Tim Morgan, Gail Tverberg, Nate Hagens, etc have said on their blogs for 10-15 years or more. It’s all about energy; money/capital is just a product of surplus energy. For ~300 years we had a lot of it, but now it’s going into reverse.

      Which MP will be the first to take courage and ask in Parliament how many of our representatives owe their loyalty to the WEF not the United Kingdom? It’s an open secret that some governments, notably Canada, NZ and the Netherlands, but also others, are pretty well under WEF control.

  2. Lifelogic
    September 3, 2022

    “It has proved difficult to control inflation whilst allowing a large increase in the money supply triggered by substantial Quantitative easing.” Translation – the clever (like 98% Denis Healey?) but totally deluded Sunak and the BoE have caused the huge inflation we have by deliberately debasing the £. Will it soon reach parity with the $? Andrew Bailey while at the FCA did not even stop the fools there from introducing one size fits all over draft rates at rip off circa 40% APR – whatever your credit rating. Such a currency debasing and clearly innumerate man is unfit to be a banker – let alone head up the BoE.

    He is also a net zero believer and so a scientific illiterate too.

    1. Lifelogic
      September 3, 2022

      A net zero financial system means huge under investment in energy and hence the current shortages and vast price rises – thanks for that Andrew Bailey. He read history at Queens Camb, about the same time as I read maths/physics at the college net door. He then did a PHD with a thesis on “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.

      So we can perhaps excuse him for not understanding banking, risk reward, currency debasement, climate, net zero, energy, energy economics, CO2 plant food… “Some ideas are so stupid that only intellectuals believe them.” ― George Orwell

      1. Sir Joe Soap
        September 3, 2022

        I think the root of the debasement this time was Sunshine Sunak. The man who can barely stop talking or interrupting, but claims to have always been overruled by other people speaking over him. One can imagine 90% of the conversation in meetings being his monologue, about his plan to save the country by sparing everyone from working and paying them from funny money. I’m sure eyes rolled but the Sunak steamroller just rolled on.

        1. Lifelogic
          September 3, 2022

          Indeed as daft as his (this will be a good plan to get voter support) let’s have a £10 fine for not turning up at an NHS appointment – when no one can get even get an NHS appointment! Hardly surprising a few forget if it takes months or their NHS transport fails. Or his eat out to help out when people pay extra taxes loans then wasted in admin and a bit given back to buy other people meals in restaurants!

        2. Hope
          September 3, 2022

          Eat out to help out was his motto! All at taxpayers expense.

          Moreover currently at the cost of any spare money you have. Did he plan ahead for inflation when printing all that money? Johnson told us it was not a problem and that it would be transitory! How did he reach this conclusion, who advised him, when speaking to the nation or did he just tell another lie?

          I wonder if Sunak can obtain his green card again or get his wife’s non Dom status back and fly off when he loses the PM race? It appears he will have a base here in the house he is having built. I suspect the pool will be warm when others die from the cold at his economic incompetence.

      2. Mitchel
        September 3, 2022

        Actually,LL,you can learn an awful lot about paper money/currency debasement,trade and trade corridors,etc from history-if you study the right civilizations and empires-the Roman/Byzantine,the Mongol(with its vast reach across the Eurasian trade routes),the Venetian maritime network,etc.History does repeat/resonate and we appear fated not to learn from it. Will it all be different this time?No,I’m afraid the west is finished!

        “The impact of the Napoleonic Wars on the development of the cotton industry in Lancashire….” ,however,sounds awfully parochial to me.

        1. Pauline Baxter
          September 3, 2022

          Mitchel. +1 !!

        2. Lifelogic
          September 3, 2022

          Indeed Starkey is very good on his Inflation the real cause David Starkey Talks video.

      3. Ed M
        September 3, 2022


        Don’t reduce great thinking just to LOGIC.

        CREATIVE -thinking is just as important. In fact, you need BOTH!

        (The best entrepreneurs, generals, politicians even scientists are both logical AND creative thinkers not just logical ones).

        1. Lifelogic
          September 4, 2022

          Oh indeed – people like Richard Feynman.

    2. Sharon
      September 3, 2022

      The net zero financial system being part of the great reset?

      Some say, from what we are seeing, this is already happening. The pandemic was the start.

    3. Peter Wood
      September 3, 2022

      Bloomberg recently reported that the BoE is starting Quantitative Tightening, selling treasuries and presumably ‘cancelling’ the cash received. As is the Fed.
      Can our kind host confirm?

      Reply Yes

      1. Hope
        September 3, 2022

        JR, what does this term mean?

      2. The Prangwizard
        September 3, 2022

        A bit OT and living the past, but I don’t understand money on the big scale which Sir John is a master at. Way back in the 1960’s when I worked in branch banking we had to provide a set of accounts of the branch on 30th June and 31st December each year. I can’t remember the details but I know wehad had to do a lot of balancng! I seem to recall also there was a ‘reserve’ in the figures somewhere – a perecentage of ‘cash’ assets which could not be lent. This was variable which loosened or tightened money supply which I could see and understand and explain to anyone who was interested. I don’t know if it is visible like that today.

  3. Javelin
    September 3, 2022

    I would also like the Central Bank to Act in the national interest. For example when lending money to banks for QE to restrict investments into equities that invest in the UK not just equities listed on British exchanges.

    1. LB
      September 3, 2022

      If we take the BoE they printed the money that has caused the inflation. All because the government won’t get its spending under control.

  4. Lifelogic
    September 3, 2022

    Some suggested listening for Liz Truss – let us hope she actually delivers and does not crumble and end up as zero border controls, lack of law and order & yet another dire & deluded, tax to death, pusher of green crap & a socialist/LibDim like Major, Cameron, Osborne, May, Hammond, Boris, Sunak…

    Nigel Farage “I despise what the Conservatives have done to Britain a Telegraph Video”.
    and Matt Ridley in the Spectator and on Choppers Politics podcast – How to be PM: ten rules for the next Tory leader to live by. Ridley is spot on though some are better at future predictions than others but yes clearly no one can foresee it completely reliably.

    1. Lifelogic
      September 3, 2022

      Juliet Samuel is surely right today.

      The Left’s reckless drive to nationalise our energy companies will solve nothing.
      Fuel bills are soaring not because of market failure, but because of government failure.

  5. DOM
    September 3, 2022

    Arguments in relation to the BoE’ independence are specious and predictable from a parasitic vested interest seeking to protect its patch from change. We’ll get more of this tedious squealing from the Oxbridge and public sector grifters when Johnson departs. If Truss tries to appease these people she may as well hand the keys of No.10 to Lnych, Sturgeon and Starmer now

    Truss cannot accept the status quo. If she does the UK will get a SNP-Labour-LD Coalition and we’ll see the Socialist horrors of what is now tragically unfolding in a dying nation across the Atlantic

    The West has been taken hostage by slime and it won’t end well

  6. Nottingham Lad Himself
    September 3, 2022

    Sir John can try, but an attempt to get people to believe that their having to choose in many cases between eating or freezing are some somehow the faults of Alistair Darling and Gordon Brown are rather long shots even by his standards.

    The Tories have been in now for twelve, yes, twelve years – and don’t we just know it?

    1. Clough
      September 3, 2022

      ‘Have been in…’ what, though, lad, for twelve years? Office, yes. Power? Not so sure. One good thing about the Covid fiasco is that it has been pretty well documented. We know that in March 2020 the government was pushed into changng its Pandemic Plan by a consortium of unelected ‘experts’ with contacts to the WHO and to the pharmaceutical industry via the universities, especially Imperial College. And with the massive help of unelected media corporations baying for lockdowns. That’s where the real power lay.

      Does the government have the power to end irregular migration across the Channel? It doesn’t look like it. The NGOs and their lawyers are winning. They seem to have the power.

      Does the government have the power to disentangle itself fully from the EU? Again, it doesn’t look like it

      That said, you are right that it’s ridiculous to imply Darling and Brown got us into the mess we are in now. As SJR acknowledged, successive financial policies have required the consent of the Chancellor, and of course that includes Tory ones like Osborne, Hammond and Sunak.

    2. Narrow Shoulders
      September 3, 2022

      Large blame can be pointed at Ed Miliband for legitimising the group think though

    3. Mickey Taking
      September 3, 2022

      If you could produce a worthy Opposition maybe they wouldn’t have been taking us down the long and winding road to misery we are following?

    4. Fedupsoutherner
      September 3, 2022

      NLH. OH sure. I can just imagine the howls of disgust if the Tories had tried a sensible policy regarding energy. Labour would have called them scum again. It’s the fault of all parties that we are where we are abd I wonder what Labour would do? Probably the same. Windfall taxes are not the answer to long term problems and that’s what we’ve got.

  7. Richard1
    September 3, 2022

    I don’t suppose the authors of these articles understand what QE actually is, how it is implemented and certainly not that it happens in effect at the direction of the chancellor, of at least with his acquiescence.

    I wish Liz Truss well, and those who serve in her govt – hopefully to include Sir John. It’s going to be a very tricky time to take over. On the positive side, given the low expectations and apocalyptic nonsense coming out of much of the leftist media, if we do manage to scrape through the winter and inflation subsides next year, 2023 could start to look quite positive.

    I really hope Liz Truss and the others who will work with her have the courage of their convictions and will do what they have said they will. 2 more years of statist drift and it’s Labour-snp after the election, with PR and votes for children introduced with no referendum.

    1. a-tracy
      September 3, 2022

      Richard, how do you know she’s won, there is talk of a 30,000 membership suddenly appearing and a tighter race than was thought. How long did people have to be members before they were entitled to vote? Remember Rishi planned his campaign videos months before he used his back stabbing dagger. It wouldn’t take the Goldman Sachs types and Rishi supporters long to get the number of sign ups to sway the decision.

      The money people hold the strings as always, we’ve now tried out universal benefits for everyone (furlough) and by jove did the vast majority on them enjoy it. Those of us who worked through it got truly shafted and we’re now having to pay for it, instead of just the recipients.

      1. hefner
        September 3, 2022

        My understanding is that, to be able to vote, one must have had at least three months of CUP membership on 26/07/2022 when Ms Truss and Mr Sunak were announced as the two candidates coming out of the votes of the CUP MPs.

        1. a-tracy
          September 3, 2022

          Sunak’s leadership website was registered in December 2021 so sufficient time to get the number of members required to sway the votes early enough to vote. Thank you Hefner.

    2. LB
      September 3, 2022

      So how do you deal with a £16 trillion pound pension debt?

  8. Dominic Johnson
    September 3, 2022

    The bank was given independence because that was an EU rule, although we had an exemption.
    Since we are no longer in the EU, and bank independence has shown no particular utility, bringing such a significant part of the state back under direct control should absolutely be part of the discussion.

    1. Denis Cooper
      September 3, 2022

      Excellent comment. Now getting on for three decades ago but as I recall the Labour and LibDem argument was that we could no longer tolerate Tory chancellors setting off temporary booms in the run up to general elections that Tory Prime Ministers could call at their convenience, so we needed an independent central bank – take that power out of the hands of a wicked Tory politician and give it to independent experts – and we also needed a law for fixed term Parliaments – take that out of the hands of a wicked Tory politician, as well. But the reality was that we were being lined up to join the euro. So now one of our defences against being bumped back into the EU might be to reverse the independence of the Bank of England – keep it in public ownership, but return the power of setting interest rates to the political sphere. Not necessarily the Chancellor alone, but perhaps he could chair a monetary policy committee made up of MPs plus some non-voting non-political experts.

      Article 130 TFEU:

      “Article 130 (ex Article 108 TEC)”

      “When exercising the powers and carrying out the tasks and duties conferred upon them by the Treaties and the Statute of the ESCB and of the ECB, neither the European Central Bank, nor a national central bank, nor any member of their decision-making bodies shall seek or take instructions from Union institutions, bodies, offices or agencies, from any government of a Member State or from any other body. The Union institutions, bodies, offices or agencies and the governments of the Member States undertake to respect this principle and not to seek to influence the members of the decision-making bodies of the European Central Bank or of the national central banks in the performance of their tasks.”

  9. Brian Tomkinson
    September 3, 2022

    Has the Governor received the Bank’s Mission Statement yet from the consultants he reportedly paid £205,000 to draft for him?

    1. Mickey Taking
      September 3, 2022

      Surely the WEF would write it for free?

  10. Narrow Shoulders
    September 3, 2022

    If there is to be any review of the bank’s mandate it should include limiting money printing by investment and retail banks, who no doubt have created similar amounts to that which the Bank of England have printed.

    Sound money around the globe would have gone a long way to preventing profiteering in the gas (and renewables) industry.

  11. Mike Stallard
    September 3, 2022

    The problem is not the politicians or the bank – it is us. When prices go up, we demand money from the government. We threaten strikes. We present ourselves as the friends of the vulnerable. We demand justice (aka cash) for people who have assumed that the state is their father figure.
    The fat cats at the top are invisible. And very very rich. And it obvious they neither care nor are prepared to change their bureaucratic empires.
    The BBC and ITV love this constant demand. It makes them look all warm and cuddly.
    Please do look at the UK bond market to see the effect of our wimpish socialist greed.
    Giving away other people’s money until it is all gone is not a good economic model.

    1. Mickey Taking
      September 3, 2022

      Instead of the note in the desk drawer saying’we spent it all’ it will say ‘ we gave it all away’.

      1. LB
        September 3, 2022

        Or how about, we’ve left you a £16 trillion pound pension debt, off the books, suckers.

    2. IanT
      September 3, 2022

      I’m afraid there is too much truth in what you say Mike. No one must ever go without, no one must ever suffer, everyone is a victim and above all, there must be no penalties in life for poor behaviour. These ‘victims’ are not responsible for their plight, whatever decisions (or lack of them) led them to that place.

      The other side of this coin, is that no one is applauded for prudence, there seems little reward for hard work and fewer reasons to strive. Because nothing is ever your own fault and clearly you can do nothing about your plight, whatever that might be.

      I live in a strange, consumerist world, where much has been lost and very little gained. I was fortunate to grow up in a place where family were close, problems shared, good manners assumed and pennies counted. People smiled a lot and found reasons to be cheerful, despite having outside loos, no central heating, no cars, no overseas holidays. The way things are going, we may well be returning to that post-war state before too long – but without the good humour to see us through.

      I wonder who we will blame then? Obviously not ourselves! 🙂

      1. Mickey Taking
        September 3, 2022

        In those days there was a generally held view that ‘its the same for all of us’.
        It wasn’t true then, but wealth and life style was not known by the masses.
        These days we know every holiday taken, and every party enjoyed, very often net wealth is reported and newspaper article deals reported.
        Don’t expect much tolerance when the suffering bites home.

        1. IanT
          September 3, 2022

          No, in those days there were still very clear working, middle and upper classes. People generally accepted that these social differences existed and some hoped that their children might move up a bit. Most didn’t but some did, mostly thanks to the Grammar school system. They didn’t neccessarily like it but generally accepted it. They also knew that they had to live within their means.
          My adult children now have the lives that any parent would wish for them (at a level my Grandfather could only have dreamed of) and I’m grateful for that. However I cannot escape the feeling that the UK has maxxed out its credit and that we can’t continue this way

          1. Mickey Taking
            September 4, 2022

            IanT – ‘They also knew that they had to live within their means.’
            A great pity that we see successive Governments failing to obey that wise discipline.

  12. turboterrier
    September 3, 2022

    I do wonder if ever the Chancellor has gone in front of the Bank of England and been asked basic questions:-
    How much
    What for
    What value does it bring to GBplc
    What impact on the country
    Is it value for money
    Has it been properly costed, evaluated
    What plans are in place to pay it back
    These projects are totally unsustainable, please close the door on the way out
    Then I wake up and return to the real world of politics.

  13. Alan Holmes
    September 3, 2022

    What we really should know is exactly who pulls the strings at the Bank of England.
    Who controls the currency because it isn’t politicians who are just flunkies for the shadowy figures that are really in charge?

  14. Ralph Corderoy
    September 3, 2022

    It is wrong for the Bank of England to be ‘independent’. Gordon Brown stated from Her Majesty’s Opposition that he would make the BoE independent to quell market concerns that Labour would be in direct control of interest rates. It was beneficial for Brown, but not the country and central banks should not be independent.

    A couple of obvious reasons:
    If the Government or BoE are going to control the price of money in addition to their tax, borrow, and spend policy then all four should work in concert for best effect.
    The BoE’s actions must lag because instead of believing the Government’s claim about their policy changes, rather than the Opposition’s, they wait for data to show the affect and this can be too late.

    Economist Andrew Lilico, chairman of the IEA’s shadow MPC, covered the pros and cons of central-bank independence in 2008: ‘Bank of England Independence: The last piece in Brown’s reputation for economic competence’,

    A month ago, Lilico wrote The Telegraph article ‘It’s time to revoke Bank of England independence. The system was supposed to keep inflation down regardless of wider economic effects. That clearly isn’t happening’,

    1. Denis Cooper
      September 3, 2022

      Well, I don’t want a system which keeps inflation down “regardless of wider economic effects.” At the end here:

      “I would question whether that is the correct mandate. When all human beings had been made unemployed and homeless and were starving and freezing on the streets, what consolation would it be that retail prices had only risen in line with an arbitrary mechanistic mandate that politicians had given to central bankers? The monetary system should be there to serve us, we should not be sacrificed on the altar of dubious monetary theory.”

    2. acorn
      September 3, 2022

      Monetary policy interest rates can do nothing in a case of supply side shocks like now. Increasing interest rates; to increase unemployment; to reduce household income; to reduce household spending; to reduce inflation; is the classic neoliberal tool called the Phillips Curve. About as useless as the Laffer Curve.

      So what should Lizzie do to get us out of the soft and brown.

      (1) Take a loan from the National Loans Fund, probably a similar size to the 2021 loan. It can be paid back over the next few decades, if at all.

      (2) Stop the Debt Management Office issuing any more Gilts for the next two years; but, let it redeem any and all Gilts that are due for redemption. This make Gilts scarce and push there price up and there current yields down.

      (3) Don’t let the BoE change interest rates till the results of (2) settle down. Decide how much you will let the Pound fall before you panic and up interest rates to defend it.

      BTW. Elsewhere I was asked about the MV=PQ velocity of circulation equation. Have a read of

      1. LB
        September 3, 2022

        How do you pay the £16 trillion pound pension debt? Your share is £600,000. What’s your plan?
        Or how about this year’s increase? £60,000.
        All off the books.
        Why is more debt the solution when the problem is the debt in the first place.

        1. acorn
          September 4, 2022

          Public Sector Insurance, pensions and standardised guarantee schemes liabilities total £1.83 trillion for 2021/22. Where have you got £16 trillion from? “All data related to Public sector finances, UK: May 2022”

  15. glen cullen
    September 3, 2022

    Britain has dropped behind India to become the world’s sixth largest economy, in the final few days of Boris Johnson’s time in power. Bloomberg UK

    1. Denis Cooper
      September 3, 2022

      Who would have thought that India’s 1,417 million people could ever produce more than the UK’s 67 million?

    2. IanT
      September 3, 2022

      India has a popoulation of nearly 1.4B Glen – and it is forecast to overtake China’s in time. I think I’d prefer to judge the success of our economy not just by it’s size but more by it’s quality?

      For me an economy that produces high quality products that the world wants, resulting in a positive balance of trade (and a stable pound) would be much better than just measuring GDP in an increasingly unproductive and non-competitive economy, where we import high value goods and become increasingly dependant on the goodwill of strangers for lines of credit.

    3. Mitchel
      September 3, 2022

      Entirely predictable-as is further decline in the future.But looking at the league table in ppp terms gives you a more realistic picture.

    4. Mark B
      September 3, 2022

      Don’t worry, Glen that deal he made with India where we accept more of their immigrants might help to address the balance.

      I am of course being sarcastic.

      Even our former colony Singapore is richer than we are.

    5. outsider
      September 3, 2022

      Dear Glen, Given that India has a billion people, that is good news for them rather than bad news for us. Our most obvious comparators are the like-sized France and Italy. All three of us are making a complete hash of it in our different ways. If we go on like this we shall rival each other to become the Argentina of the 21st century.

    6. Fedupsoutherner
      September 3, 2022

      Why are we still giving them money?

    7. acorn
      September 3, 2022

      If you include the US State of California with its forty million population, the UK is actually 7th largest economy.

    8. graham1946
      September 4, 2022

      India is not fixated with net zero and intends to use coal and gas as needed. There is even talk of a pipeline for gas going from Russia to Iran then to India so by-passing Europe altogether and more than making up for the loss of EU purchases.

  16. Mickey Taking
    September 3, 2022

    ‘Tories put on a war footing for an early election’? The papers shout.
    Really? A bit like running up the slope to the gallows instead of a slow pulled along walk?

  17. graham1946
    September 3, 2022

    The knives will be out for Truss from day one, just as they were for Boris. The establishment don’t like the choice.
    I think she will be a disappointment and rumours are that once again as PM she will repay favours to cronies with the big jobs rather than select on talent. She only has two years tops to turn the government around, so she cannot afford to do anything like this. There will be a Tory wipeout in 2024, if we get that far, then we will really be in trouble.

  18. acorn
    September 3, 2022

    There is no such thing as an independent central bank in a sovereign fiat currency economy. It is a public sector Bank that issues credit by creating deposits in customer accounts, just like High Street Banks make loans. It is the most undercapitalised Bank out there; far lower than any other Bank would be required to have. Fortunately, its owner, the Treasury, issues the Sterling currency which it can never run out of. Hence, the UK Treasury and the BoE can never go broke in the Pound Sterling economy.

    The BoE has little of its own money to BUY anything, that’s why it LEANT £895 billion to the Asset Purchase Facility so it could operate the QE process. The Treasury backstops the APF loan and everything else the BoE does.

    Once the APF gets a Gilt from a seller, it strips out all the cash in it and gives the seller back the cash that bought the Gilt in the first place. The Gilt is now empty and could be put straight into the digital shredder. The government Securities Account and its Reserves account at the BoE still add up to the same amount; no new money has been “printed”, the net currency in the economy has not changed, it has just changed its form.

    The US Treasury and the FED put much more importance on money stocks and velocity of circulation (VoC). These metrics are never mentioned in the UK.,M1V,
    UK M1V is currently 0.92; M2V is 0.73. That means a Pound is not even circulating once a year. Everyone is hoarding the government’s money.

  19. Atlas
    September 3, 2022

    Agreed, Sir John.

    I commented here a few months ago about the note of concern that the early 19th Century Banker and later on Economist, Ricardo had to say concerning ‘Paper Money’ – he foresaw what letting Politicans print money would do.

  20. formula57
    September 3, 2022

    The reason “The Bank may not want to go back to strict money targets that were used in the early 1980s…” being it made such a mess of M3 targetting back then, that measure being an unreliable indicator of the tightness of monetary policy and the whole approach suffering from manipulations by the Bank?

  21. a-tracy
    September 3, 2022

    John, when does the £1bn per month sent to the EU stop? Doesn’t it start to abate from September 2022? Or has our current government agreed to pay more on some premise or another that I’m sure wouldn’t apply to all members of the EU equally. If the bill has inflated just because of pension pot top ups can you imagine what it would be for everything now!

    “Following approval of the Withdrawal Agreement, the UK left the EU on 31 January 2020 and entered a transition period, but continued to contribute to the EU as if it were a member.”

    “ The UK will contribute towards the EU’s outstanding commitmentsas at 31 December 2020. Recipients in the UK will also receive funding for outstanding commitments made to them.”. Yet the other day I read they kicked the UK out of Horizon even though we still paid up?

    1. a-tracy
      September 3, 2022 14/06/2022 ‘The UK’s contribution to the EU budget’
      30/12/2020 ‘Brexit: The financial settlement – in detail’ see figure, with annual and total amounts in Table.

  22. Mark Thomas
    September 3, 2022

    Sir John,
    Aside from today’s subject on the independence of the BOE, behind this it appears that the campaign against Liz Truss by the mainstream media and the establishment has already begun. Once their preferred candidate for the leadership is resoundingly beaten and consigned to the backbenches, the onslaught against the new Prime Minister will become unrelenting. I hope she is prepared.

  23. paul
    September 3, 2022

    In this day and age a central bank is not required, a central bank is just a political tool, at the moment the market is telling investors that bank rate is to high with a inverted yield, that means 2 year rates above 10 year rates, so why are they rising rates, well it not because of inflation, inflation was a cause of the gov own policies of net zero, war and telling every one not to invest in oil and gas which has lead to high prices, plus you always have high inflation when coming out of a downturn as the high street banks start lending money again, the only reason rates are going up is so they can cut rates again to make out that they are in control and give people and companies who have a good standing with banks to borrow more money at low rates to invest at the bottom after causing the markets to crash, they now done this 5 times in the last 22 years in the USA and each time investors in the know double their money or more each time they do it. I think the bail-out for the people energy bills will be big for the simple reason, to keep inflation up to keep rates going up plus the money going to you to pay and use more energy which go to them, it a no brainer, while you are outers they are double their money or in some case 10 folding their money all on the backs of you the plebs as you known in parliament.
    Anybody hear who thinks Labour would be worst, do not know how the political system works, the con party just make themselves unelecterable so they can get back into the EU so they do not have to change any laws and because gas is the new green fuel in the EU. They think 30% to 40% down on markets as rates go up, I think they are out control with greed and going to be alot more and for longer, bug farm are already setting up.

    1. a-tracy
      September 4, 2022

      Paul, aren’t you forgetting Putin in all this? The Russians may just not conform to what the West’s financial masters want to do.
      People are not rational, if they pluck a few feathers they can ignore that for a spell but if you start leaving their flanks naked to the elements they start to get vicious and stuffing toffees in the mouths of the poor isn’t going to satisfy them.
      The Labour unions are trying to whip up little storms everyone in a co-ordinated fashion they want to watch too many people don’t get burned.

  24. Barbara
    September 3, 2022

    Everything is topsy-turvy. Illegal immigrants now cost us £40,000 per head per annum minimum, in costs and benefits for a life – to them – of luxury.
    Our indigenous pensioners who have paid all their working lives get £9,628 max.

    1. Diane
      September 4, 2022

      And still they come. After 5 days of zero & 221 on Friday, it was another 960 / 20 boats yesterday, Saturday. Totally unacceptable.

    2. a-tracy
      September 4, 2022

      Barbara – the only pensioners that ONLY get £9628 max are those that bought their homes and paid them off, have put savings aside to pay for any holes in the roof and look after themselves on meagre incomes much less than those the Joseph Rowntree people say people need to survive in the UK happily.

      The other half of the pensioners get all sorts from Pension credits, which then unlock universal benefits, free tv licences, it pays their home rental, oftentimes on large homes they no longer need and live alone in. They’ve often not saved because they’ve been spending on bad habits that then result in disability which opens up a whole new gamut of funds to claim.

      I know people who have never worked on more money than my parents who scrimped and saved, worked hard, economised, and lived within their means. I also know people are wising up – selling the homes they scrimped to buy and start renting and then are spending it all in a flourish because their mates are doing better than they are owning nothing. It all seems like a good idea to governments until the tax-payers have to pick up the tab for this folly in five years time.

  25. Iago
    September 3, 2022

    Would that the government were independent, but it is in thrall (that means in bondage by the way) to the World Economic Forum – look at Johnson parrotting their words, build back better and net zero, though he has not yet said you will own nothing and you will be happy. The intention of government policies, every one seemingly at odds with sanity and the wellbeing and safety of the population, is to reduce us to the status of livestock.

  26. Denis Cooper
    September 3, 2022

    To repeat part of a comment submitted yesterday but not published:

    “… central bankers must be stopped from destroying our economies for sake of a statistic. And in the UK the Chancellor can do that, by issuing a directive to the Monetary Policy Committee.

    “The Bank of England Act 1998 requires the Treasury to specify at least once every 12 months how price stability should be defined and what the economic policy of the government consists of.

    This is the monetary policy remit, which the Chancellor specifies in a letter to the Governor of the Bank of England.”

    A letter is due before October 27, and it should say that the normal inflation target is being suspended.

  27. Denis Cooper
    September 3, 2022

    Off topic, I’m quite interested in the Artemis moon rocket due to be launched this evening. Of course Artemis was the twin sister of Apollo, and a moon goddess rather than a sun god, and here is a female astronaut giving a three minute explanation of it:

    Anyway I note that Donald Trump signed the order starting the project in December 2017, not long after the Irish EU Commissioner Phil Hogan had issued his threat over the Irish land border:

    “On the TV this morning it was stated that the UK government is “desperate” to move on to trade talks, but this would be vetoed by the Irish government unless the UK government committed to keeping the UK in both the Single Market and the Customs Union.”

    So here we are five years later, Artemis is ready go while the UK government still hasn’t sorted out the Irish land border and in fact is still digging itself into a deeper hole … luckily, the hole cannot get too deep because even if the EU suspends the entire trade deal with the UK that will only have a trivial effect on the UK economy.

    1. a-tracy
      September 4, 2022

      Denis, our £1bn per month contribution is due to greatly reduce this year, coincidentally from October when we are due to start the big chill, hunger and strikes to weaken us. From the end of the year our contribution drops again, the EU need us back in the SM and CU a BRINO to keep paying the EU bills. They don’t want us back in with pesky MEPs they then start having to ignore again. The rest have given the French and Germans too much power.

      Our government assured us this wouldn’t happen that’s why Boris had to be removed, and if Truss or Sunak continue with Boris stubborn resistance to the SM and CU they will be similarly treated (their own group of MP will twist and turn to delay decisions and actions so that we can be folded back in). Labour will sign us back in faster than you can say BRINO and it will be the end of them and the UK. Unless we get a group of politicians with the strength and resolution to see this through and I just don’t get that impression from what I hear on tv news and read in the papers.

  28. William Long
    September 3, 2022

    The reaction to Liz Truss’s apparently, as you say, sensible proposal to review the bank’s mandate, is typical of the reaction to anything that could be construed by the ‘Elitists’ as a departure from what they clearly regard as their status quo, and it makes clear the nature of the opposition she will face, not just from the Left, but from what Mrs Thatcher so aptly called: ‘The enemy within’. The great question therefor, is whether Ms Truss possesses sufficient of the Iron Lady characteristics of her predecessor to face down her critics? The amount of nonsense that the latter are now talking, encourages me to think that at least they are getting worried that she possibly might do.

  29. Mickey Taking
    September 3, 2022

    Is It me or was the interview with Mrs Zelenska very offensive?
    Olena Zelenska told Sunday with Laura Kuenssberg that if support for Ukraine was strong the crisis would be shorter. In an interview recorded in Kyiv, she also said it was important to keep highlighting the human toll of the war. And Mrs Zelenska said while she rarely saw her husband, they talk every day.
    The first lady, who has been married to Ukrainian President Volodymyr Zelensky since 2003, spoke to the BBC’s Laura Kuenssberg in Kyiv. In a wide-ranging interview to be broadcast on Sunday 4 September, Mrs Zelenska was asked what message she had for British people who are facing soaring energy bills in part due to Russia’s invasion of Ukraine and the impact that has had on global gas and oil prices.
    “I understand the situation is very tough. But let me recall that at the time of the Covid-19 epidemic, and it’s still with us, when there were price hikes, Ukraine was affected as well.
    “The prices are going up in Ukraine as well. But in addition our people get killed.
    “So when you start counting pennies on your bank account or in your pocket, we do the same and count our casualties,” she said.
    I’d have liked Laura to point out we were first in with high tech support in the face of Russian threats to nuclear bomb us. We continue to supply very expensive weapons free, and are training their soldiers in SAS type tactics. Who else in Europe has provided a fraction of direct support as we have? This feels like the sort of gratitude we have got from France etc ever since WW2.

    1. a-tracy
      September 4, 2022

      MT – Oh dear! Sounds rude and ungrateful. Like you say we get the blame for everything we do to try and help from Iran to Iraq to Afghanistan it’s a shame we’re not Switzerland.

      People on here keep reminding us we’re a small, insignificant little Country so lets start acting like one. We didn’t provoke any war or prod the Bear.

  30. mancunius
    September 3, 2022

    Why is the General Secretary of the TUC one of the six non-execs on the board (Court of Directors) of the BoE?
    Rather like naming Richard Dawkins as a Cardinal.

  31. Ed M
    September 3, 2022

    Listening to fascinating interview with Mrs Thatcher in 1975, she comes across as someone who believes in capitalism as something more to do with freedom of the individual than wealth. She sounds very much like a Methodist and the need to work hard in life (work ethic). In other words, she’s an old-fashioned, benign capitalist as opposed to some / many capitalists today who are all about money, money, money (and no work ethic) as opposed to capitalism being about freedom of the individual (and work ethic).

    1. a-tracy
      September 4, 2022

      EdM – can you give me an example of which people you mean as ‘capitalists who are all just about money, money, money (and no work ethic) so that I can understand the point you’re writing please?

  32. Am
    September 3, 2022

    I fear the last paragraph and the IMF back running Britain. If inflation reaches 25 percent it will have to happen though.
    People don’t realise how fragile our situation is as a country.

  33. Giles Brennand
    September 5, 2022

    It is difficult to control inflation through monetary measures alone. The changes on the real economy are always lagged, sometimes by significant periods, and the effects are neither linear nor certain. Which is why the Bank often seems to be doing the opposite of what the current stage of the economic cycle might suggest: the know that past interest rate moves have not yet played through and that any moves made today will have multiple effects in the future.

    Adding to the bank’s mandate a responsibility to not only track a 2% inflation target, but also worry about economic growth made a very difficult task practically impossible.

    Adding ‘support net zero’ was a ludicrous demand, the the Bank should have as a matter of principle refused to accept.

    Instead they foolishly acquiesced to the mandate and attempted with essentially a single lever, interest rates, to achieve simultaneously inflation, growth and net zero targets. Inevitably they failed – at all three.

    Reduce their responsibility to the inflation target. Accept that other levers, such as government expenditure, public sector investment, public sector borrowing, taxation etc, which are completely outside the control of the BOE are needed to deliver economic growth. (And the cult of the green agenda too, if you must).

    Whipping the BOE to do the impossible with the tools at their command is futile, a distraction, and an excuse for not addressing the fundamental issues elsewhere.

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