The Bank of England fights itself

The Bank of England has two major committees. The Monetary Policy Committee is currently wanting interest rates to climb ever higher and is willing to see mortgage and other longer term rates of interest hiked as well. They regret the big inflation that has taken place, though they blame the European war rather than their own ultra low rates and bond buying in 2021. They forget that inflation was already at 5.5% before the invasion started, 175% above target. They want to start selling the large portfolio of bonds they bought up over the last decade to take big losses on theĀ  bonds and drive interest rates higher.

The Financial Policy Committee is responsible for orderly markets and avoiding financial crises. They have had to intervene in the last two weeks to temporarily reverse the MPC’s policy of selling bonds and hiking rates. They have warned that rates have risen too far too fats and bonds have been too depressed. This has led to issues for some pension funds and other owners of government bonds that has worried them .

This big split has led to some announcements that seem contradictory. We are told the MPC has great resolve to make money dearer to get rid of inflation, and that the FPC needs rates lower to cut the losses on bonds to ensure stability. In 2021 the Bank was united in wanting rates as low as possible and bond pricesĀ  as high as possible. In 2021 for a time the Bank was united in wanting to correct its 2021 errors by higher rates and ending bond purchases. More recently we have had the announcement of bond sales, promptly followed by the announcement of bond buying, to be followed by possibleĀ  bond sales shortly afterwards. No wonder the market is disturbed.

We need stability of policy and clear signalling of intentions. Why not say the Bank has no plans to sell any bonds all the time they are this depressed? They should give early warning of any intent to sell should bonds rise to a more acceptable level. They could do what Japan does and give indications of what they think a sensible level of 10 year interest rates would be. As the Bank owns around one third of all the gilts and is such a major player they can have great influence over the interest rates and bond prices. They need to use this influence for the Goldilocks rate – the rate that brings inflation down without causing a panic or deep recession.

132 Comments

  1. Mark B
    October 17, 2022

    Good morning.

    I see our kind host has decided not to make any comment on our new Chancellor.

    Back in the day under Mrs.T we had the likes of (Lord) Geoffrey Howe, (Lord) Nigel Lawson and (Sir) John Major as Chancellors of the Exchequer. These men had at their disposal all the powers, and responsibility, to do their jobs. Today we are on our fourth Chancellor as in as many months with a new Lame Duck PM economic policies, on which she gained office, in shatters.

    Our kind host has carefully laid out to us the various responsibilities everybody has. To me they can seem to have conflicting interests each armed with its own weapon to combat it. Well controlled and marchalled at the top these bodies can work, however, as we are seeing the government is forced to raise taxes whist others either buy or sell bonds, raise interest rates and so on.

    I think it is time to reverse another one of New Labour’s bad idea’s. One can easily see, even in good times, that a strong and stable government leads to a strong and stable economy on which business thrives, no matter what the interest or tax rate is.

    We need stability and you are not going to get it by constantly changing people, policies and direction.

    There is already talk of PM Liz Truss being gone before Christmas. At this rate I might be tempted to throw my hat in. After all, I couldn’t do any worse.

    1. SM
      October 17, 2022

      Mark B: for what it’s worth, I would support you becoming PM, on one condition – that you make our host Chancellor.

      1. Mark B
        October 18, 2022

        Deal

    2. Lifelogic
      October 17, 2022

      (Lord) Geoffrey Howe, (Lord) Nigel Lawson and (Sir) John Major were all rather poor or very poor Chancellors. Due mainly to the pressures from the EU and the group thing lunacy of the ERM. Howe was largely responsible for the ditching of Thatcher with his broken bats resignation speech leading to Major and other forcing Thatcher into the predictable disaster of the ERM and 17%+ mortgages. This destroyed many people businesses and lives. The foolish John Major never even said sorry.

      To reduce inflation ditch net zero, cut sales taxes, cut the green crap levies, cut all the vast government waste and have sensible interest rates. Stop printing money as the foolish Sunak did hugely. Also get real competition in bank lending. Paying 0.4% on deposits and charging 100 times more 40% on overdrafts is not real and fair competition (this done by the FCA while the foolish Andrew Bailey was in charge of it). But clearly Truss is done for as is any sensible Conservative Party. Sunak is the man mainly responsible for the current dire economic position with his tax, borrow, print, debase, manifesto ratting and sticking to expensive unreliable energy policies.

      1. Lifelogic
        October 18, 2022

        The BoE has been appallingly incompetent (or perhaps worse deliberately harmful) too.

    3. Gary Megson
      October 17, 2022

      Mr Redwood is fooling absolutely no one here. The problem is not the Bank of England, the problem is 12 years of catastrophic decisions taken by the Conservative Party. Brexit has harmed our country permanently, and now Truss/ Kwarteng think they can lecture financial markets on how to run an economy. Tough – reality bites, and it is time for the ideological Conservative failures that have been running this country to go. General Election now

      1. a-tracy
        October 18, 2022

        Gary, I agree with John here is my take Truss and Kawtang are not solely responsible for the turmoil. Rather the BoE initiated and then manipulated the market at the precise time to create the impression that the problem emanated from No 10.

        Truss should never have stabbed Kawtang in the back. Big mistake, BIG; trust in truss was her moto – not even her close friends can trust her!

    4. Sir Joe Soap
      October 17, 2022

      Has to be said Cummings, who was close by in no. 10, said she was “crackers”. I think the whole business about dressing up to mimic Thatcher was a warning, but with a choice between a risky proposition and a known snake, we felt the risky proposition was the better bet. Truss clearly doesn’t have the bandwidth or experience, and is a prime exponent of the Dunning Kruger effect. No gravitas or hard experience to hold on to or defend her decisions means that she just crumpled at the first hurdle. Time to exit stage left.
      I have a feeling despite his pedigree Hunt has more emotional intelligence and guts than we give him credit for, and will nuance his decisions. But I agree his final destination isn’t necessarily what we want here.

    5. Dave Andrews
      October 17, 2022

      The Conservative Party wouldn’t let you do what needs to be done, neither would the country with its addiction to welfare.

    6. Hope
      October 17, 2022

      I think Bailey has a lot to answer for and it defies logic why he is still in place. I thought the govt would have learned from useless pro EU touting climate alarmist Carney! Baile said yesterday he and Hunt were of similar minds. God help us. Hunt was for more sever lockdown, ardent pro EU and a totally useless health secretary. He was going to end health tourism. As the longest ever why did he fail before quietly dropping the policy? He never had any intention. He singly and resoundingly failed to prepare the nation for covid.

      UK spent billions on no deal what was done with it?

      ATracey has repeatedly asked why the UK is paying EU more than the alleged divorce bill. JR, could it be we retained liability but no assets in ECB? Does anyone have confidence Hunt will stop paying EU multiple billions? Hunt was in govt when stupid moronic overseas aid was based on GDP. Will he now stop this crazy give away when the principle target is to give away all the borrowed money!

      Mark,
      You would be better than Truss. Who would you give your mate (also promoting virtue signalling quota appointment) a job then sack him for enacting your policy!

    7. Ian B
      October 17, 2022

      @Mark B +1

      Then there is the Democracy angle. Each new Empire is without accountability and even worse responsibility. Yet they immediately have a Political View that they want to dictate ā€“ never selected, never elected. Mission creepā€¦.

    8. Nottingham Lad Himself
      October 17, 2022

      Sterling has only risen precisely because he has been seen to take the advice of wiser counsel such as the Governor of the BoE, the OBR, the IMF and others.

      “Take Back Control”

      šŸ˜‚šŸ˜‚šŸ˜‚

      1. a-tracy
        October 18, 2022

        NLH, Just how accurate are the OBR and IMF, do you have any proof of your assertion that their estimates are wiser?

    9. John E
      October 17, 2022

      It seems that the Chancellor is having to make more announcements quickly this morning in order to get them done before everything is on hold again for another leadership contest. This time it will have to be settled by the MPs.

    10. agricola
      October 17, 2022

      UK government cannot be strong and stable with effectively a four year stint in office and staffed by politicians of very limited experience. It is a recipe for handing government to a civil service not necessarily more competent or less political, but having the advantage of longevity. Put another way , they know how government works and can control how it works. The management of Toyota, manages Toyota on a flexible 25 year plan. UK government is the antithisis of this. I know who’s vehicle I would prefer to be in.

    11. Alicia
      October 17, 2022

      You haven’t a chance unless you’re in with Schwab’s gang, Mark..

      Has he, Mr Redwood.

      Not a hope!

    12. Mitchel
      October 17, 2022

      Instead of regime change in Russia and Iran (to name but the top two on the list),let’s have regime change here.I don’t mean replacing one hapless puppet with another but a total bolshevik style clearout -the complete eradication of the British establishment.

      1. Mickey Taking
        October 17, 2022

        A sort of overnight purge? Perhaps we need stormtroopers and lots of police and army vans to drive them away into the night, never to be heard of again…a sort of justified dystopia?
        A public ban on the words Eton, Winchester, Grouse, Fly-fishing, Polo, Bow-tie, Morning suit, Nanny?

    13. Peter
      October 17, 2022

      In the words of Johnny Rotten:-
      “Ever get the feeling you’ve been cheated?”

      We now have Mr.Hunt in charge in a seamless takeover and it’s back to business as usual.

      George Carlin said ” You don’t have choices.You have owners.”

      How to address that is a big,big problem.

    14. Sulis
      October 17, 2022

      ā€”Mark B
      ā€˜ strong and stableā€™ brings to mind the Redwood, a pleasant distraction from the Yew. I do hope our kind host can lend the PM some of the Redwood qualities.

  2. DOM
    October 17, 2022

    The surfeit of worthless paper issued by government on the balance sheet of the central bank led by Bailey is evidence of government policy whose only purpose appears to be political in nature.

    Every politician who clambers on a platform and calls for ever greater levels of State spending are the very people directly responsible for this nation’s ills and woes. Voters endorsing this financial barbarism deserve all they get

    1. Lifelogic
      October 17, 2022

      +1 but to be fair to voters they get very little effective say in this. They rarely if ever get what they vote for.

    2. Ian Wragg
      October 17, 2022

      We have a socialist government and governor of the BoE.
      Bailey deliberately undermined Truss to make sure we followed the WEF agenda.
      Gunt has reversed every tax cut, no doubt the fracking ban will reappear and other sensible ideas will be ditched.
      Farage is coming back and not a moment too soon.

      1. Ian Wragg
        October 17, 2022

        So now we understand why no tax cuts and increase in corporation tax. All to determine investment on the long march to net zero.

      2. a-tracy
        October 18, 2022

        Ian, Farage bailed! I don’t understand this belief in Farage at all. He didn’t stand in a winnable seat because he knows there is not a jot he could do as an MP

    3. Berkshire Alan
      October 17, 2022

      DOM

      I have to agree, funny money and creative accounting only works very short term, you cannot build a Country on such polices, simply because they are not real, and do not record or state the true financial situation.

  3. Stephen Reay
    October 17, 2022

    Inflation will only come down when corporate greed ,energy costs and supply shortages are addressed. By not following USA interest rate risings will only bring more inflated prices on us.

  4. Fedupsoutherner
    October 17, 2022

    Instead of keep asking for your advice John why don’t they do the sensible thing and make you chancellor?

    1. Fedupsoutherner
      October 17, 2022

      Honestly John. It would make sense for you to be in place of Hunt. You know how markets work, you know how the banks tick and you’ve experienced similar episodes of monetary crisis in your time in the government. We need someone who is familiar with the financial institutions. Not some failed minister who doesn’t know his way around the financial markets. You couldn’t make it up.

  5. Cuibono
    October 17, 2022

    I think the BoE did give indications of long term interest rates.
    Or rather they parroted orders.
    ā€œLower Longerā€.
    Keep house prices sky high. Build Build Build ( oh whoopsā€¦Back Better)
    And other cringeworthy slogans.

  6. Donna
    October 17, 2022

    The Not-a-Conservative-Party is in open warfare.

    Hunt’s application to become Prime Minister was rejected by the Party’ MPs. Those MPs narrowed the field of candidates to a choice of two and the Party Membership chose one of them, Liz Truss.

    The losing faction, in cahoots with the IMF and Bank of England are over-riding the wishes of almost half of CON MPs and two-thirds of the Party Membership. They have effectively installed Hunt as de facto Prime Minister with Truss as a hostage Prime Minister and are now systematically breaking the Manifesto the Party was elected to deliver.

    The British people voted for a Conservative Government led by a Brexiteer who promised to deliver Brexit. We now have a rabid Remainer foisted on us who has no mandate and is breaking the General Election Manifesto.

    I thought you were an honourable man Sir John. How on earth can you stay, and support, this utterly disgraceful, authoritarian parody of a conservative party?

    1. Hope
      October 18, 2022

      +1

    2. a-tracy
      October 18, 2022

      Truss should never have stabbed Kwarteng in the back. Big mistake, BIG; trust in truss was her motto – not even her close friends can trust her!

    3. anon
      October 19, 2022

      Indeed it appears very much to me that KK was ambushed.

      We now have remainers fully in charge , albeit undeclared, a remainer party in power, with a supporting opposition and HOL full support.

      Thou shalt not diverge from EU rules in any meaningful way.

  7. Mike Wilson
    October 17, 2022

    To follow the example – if someone buys a long dated bond that pays 1% and subsequently finds they could get 2% on their money elsewhere – and, as a result the bond has dropped in value by half, why on earth would they sell the bond? Surely buying a long dated bond is a decision you stick with.

    It seems an odd decision to me. Why would anyone buy a long dated bond at 1%. Youā€™re guaranteed that your money in 50 years time will be worthless due to inflation.

  8. Cuibono
    October 17, 2022

    Strikes me that there are only two possible explanations.
    They are totally incompetent ā€¦
    Or they mean us harm.
    Like everything else that is going on.
    Take your pick!

    1. Mickey Taking
      October 18, 2022

      Plenty of evidence that both apply?

  9. Bryan Harris
    October 17, 2022

    It would appear the BoE is woke, having no sense of historical matters, indeed, why do they create new confused policies when they could have learned from past problems?

    Surely bad enough that the BoE is conflicted internally, but their policies have already caused a lot of us great pain, with nobody to tell them to get their act together.

    In these days of decline, perhaps we shouldn’t expect institutions, like the BoE, to be more competent than they are – because it would appear that all such institutions are aligned with the aspirations of an invisible but inherent global elite.

  10. Cuibono
    October 17, 2022

    Budget Day used to be magnificent.
    The red briefcase, the dog walk-in the park.
    All so safe and secure and STABLE.
    Probably all an illusion. Just our smoke and mirrors economy at work.
    The magicianā€™s mask is now slipping somewhat?

  11. Sir Joe Soap
    October 17, 2022

    2.25% still feels far too low. I’d be comfortable at 5% but more so at 6.5% now. It doesn’t need to be for long, but it needs to be. The United States realises this with a similar inflation rate, and traditionally our interest rate needs to be higher than theirs.

  12. Narrow Shoulders
    October 17, 2022

    Odd that anyone would buy bonds that are only paying a portion of a percent return.

    Perhaps the rules need to be looked at, I assume that the bond paper these institutions are holding is presumed to be risk free? It seems not.

    1. miami.mode
      October 18, 2022

      NS, it may seem an odd problem but if you have Ā£billions where do you put it, especially if you need fairly easy access to it? Inflation will eat away at it if you keep it as cash. The bond market is the biggest in the world so you put it where you think it will be safest. At more than Ā£2trillion the UK bond market is more or less equal to the entire FTSE100.

      1. Narrow Shoulders
        October 18, 2022

        @MM very true but, as with the gas futures market, margin calls must surely be priced in as part of the model. It appears it wasn’t risk free so the rules do need to be reviewed to make it less risky.

        For a fund to be on the verge of collapse having invested in the lowest risk option seems very odd.

      2. Narrow Shoulders
        October 18, 2022

        True @mm but shorting it?

  13. Dave Andrews
    October 17, 2022

    If only the Bank of England could be given an easier task. It’s being put in an impossible position by a government that continues to run a deficit, strongarms it into printing fiat currency, which the bank lends out for the government to borrow, then the government demands the Bank of England do something to try and make the currency worth something.
    The government needs to get spending under control.

  14. Sea_Warrior
    October 17, 2022

    There seem to be quite a few foreigners on the MPC. Perhaps that gimmick needs to be ended.

  15. Leslie Singleton
    October 17, 2022

    Dear Sir John–There are no words that can adequately describe where we are. Truss should go and her resignation cannot come too soon. The idea of not panicking provided she goes before the Election is especially pathetically wrong. It is all very unpleasant but she has become a boil that needs lancing. Septic already. Bring back Boris. Damage limitation is all we have left and there is a chance he could produce a rabbit out of the hat.

  16. Ian B
    October 17, 2022

    Good morning Sir John

    The UKā€™s structures have become plagued by mission creep, there is a committee for this a committee for that and so on. Then there is the ever increasing Quangos, then the committee and additional Quangos to check on them.

    Every time a department for this of that is set up they need extra layers of management to build the empire and protect themselves. Then you get into their Hand Safety management, their diversity management and so on.

    The real drain on the UK is they are never value for money. When was the OFT or OBR ever correct?

    These pseudo entities are self perpetuating. The MsM reported yesterday that the BoE has hired a PR Cult to make themselves look ā€˜warm and cuddlyā€™

    It is destruction of society from within. Get rid of the lot and no one would notice.

  17. Ian B
    October 17, 2022

    Why doesnā€™t Government come clean all these Quasi authoritarian outlets, are in reality ā€˜jobs-for-the-boysā€™ that couldnā€™t get a proper job in the main stream of industry.

  18. Merrie qubus
    October 17, 2022

    Interesting article by Penny Mordant in this morningā€˜s Daily Telegraph. Reminds me of the quotation: he who wields the dagger never wears the crown, or something very similar.

  19. Mike Wilson
    October 17, 2022

    I see a poll today predicts Labour getting 411 seats. The mind boggles. 411 even more useless people than we already have! Laugh or cry? Itā€™s difficult to know what to do.

    Enjoy the pay and perks of the next two years. Youā€™ll be retiring from politics then. Mind you, what a pension youā€™ll have.

    1. a-tracy
      October 18, 2022

      Mike, in all this turmoil labour, couldn’t even win two of their council seats back last Thursday, their vote collapsed, not a whimper about it in the general media. The Tories took the seats!

  20. ChrisS
    October 17, 2022

    One cannot imagine that the bond markets would be in such a state had Eddie George still been governor at the bank. The decision to announce the end of support for long dated bonds was particularly unhelpful to the government and Bailey must have know what would happen.
    So why did he stop it when it appears that he had spent only a fraction of the Ā£65bn he had set aside for the programme? In any event, Ā£65bn was the amount he had intended to spend on buying bonds so if money was lost over a period, it would have been nothing like Ā£65bn when the bank sold them back into the market.

  21. Ed M
    October 17, 2022

    Truss is a disaster. Hunt is the only hope for the Conservative Party not going down the tubes for the next 10 or 15 years or even longer (enough time for Labour reverse everything the Tories have done over last 40 years and take us back to something like in the 1970’s.

    Doesn’t matter if Hunt were a Remainer / Brexiter / Left-wing Tory / Right-wing Tory, he’s the ONLY Tory left now who is able to lead. A leader who would be able to win a general election. He’s like the Last of the Mohicans (unless the Tories bring someone such as William Hague back into front-like politics but would he – and others like him – want to?).

    Things are so serious now, that perhaps the majority of Tory voters would contemplate Starmer as leader than Liz Truss taking us into a General Election (and so a kick up the backside to get the Tories to seriously sort out who they are and what they believe in). I will try and to my best to vote Tory or abstain but not going to vote for a party that is flotsam and jetsam and who only cares about the super rich instead of middle class Britain overall (and working class) and instead of small to medium business, in particular the high tech industry, and entrepreneurs who I want protected and helped.

    1. Donna
      October 18, 2022

      The CONs have already taken us back to the 1970s. Labour will take us back to the ’30s, but thanks to the Not-a-Conservative-Party that’s what’s coming … because the coalition who gave Johnson an 80 seat majority won’t be voting for the Remainer authoritarians who have carried out this coup.

      1. Ed M
        October 19, 2022

        ‘Not-a-Conservative-Party’

        – I do get what you’re saying. Drastic things do need to be done (I agree with you). And we’ve had too many career politicians just biding time. I get it. But I don’t think you can sort out all the country’s woes through economic policy or even politics alone. It’s all part of the decline of Western Culture / Civilisation (including things such as – drop in – Work Ethic, Personal Responsibility, Family Values, Patriotism and so on). And ultimately this can only be cured through Education, the Media, Arts, the Churches etc – not just politics although of course politics is key too).

    2. a-tracy
      October 18, 2022

      Hunt lead us into a failed NHS storage of PPE and emergency response system, one of the longest serving Health Ministers and even for all the extra billions spent didn’t get the results! I have more faith in Coffey and if I were her I’d start being loud in the media reporting all the extra billions the NHS has been taking of our money.

      I’d check the attendance records at every trust and compare them with each other, we have qualified high grade nurses trying to be managers. Qualified operational managers wouldn’t try to be nurses, why are nurses without administration and management training trying to run wards just so they don’t have to do shifts anymore – look there first!

      1. Ed M
        October 19, 2022

        I’m not a huge fan of Hunt. But he comes across as a calm leader who at least thinks and responds in a human-like way which is what the Tory Party, Country and Economy needs right now to settle things. Ms Truss just comes across as a really rigid thinker (which is not the same as being clever). And Kwasi just came across as if he was having lots of rushes to the head the whole time (and what on earth is Ms Braverman up to sending emails like that ..).

        I’m not for or against any group of Tories right now or ever in particular (I think each group has good and bad things to say). I just want the Tory Party to survive and do well in the future – for the sake of the country.

  22. Ian B
    October 17, 2022

    Another one for the list – institute for Fiscal Studies

    What the say about themselves, they are a ‘non-political organisation’

    Then today they hit the MsM today stating –

    ā€œ’There wasnā€™t room for Ā£40-odd billion of tax cuts’
    Paul Johnson, the director of the Institute for Fiscal Studies think tank, said a Ā£60 billion hole in the public finances meant there “wasnā€™t room for Ā£40-odd billion of tax cuts”.

    Who Funds institute for Fiscal Studies? Funded by – UK Government departments, foundations, the European Research Council. that means the taxpayer is funding yet another political entity without being able to hold the to account or get them to take responsibility for their utterances.

    UK Government depatrments do not have their own personal money they just get to take from the taxpayer. While everyone has a right to a personal view political or otherwise, those that take the taxpayer pound that then are not submitting themselves to the electorate should not be permitted to use their taxpayer funded platform for political purposes.

    1. a-tracy
      October 18, 2022

      “30 Sept 2019 ā€” In 2018 the UK’s gross contribution to the EU amounted to Ā£20.0 billion!”; ONS
      some of that money came back into the UK to spend on the EU priorities; perhaps the IFS and other quangos got a lot of EU money and are the UK government filling their hole?

      This saving from Brexit to spend on UK priorities how come it is not discussed as the money we can use to fill our own priority black holes?

  23. agricola
    October 17, 2022

    What you suggest advocates order, professionalism, and common sense. In reality we have the opposite which in part brings into question the independence of the BOE. However the opposite under our present government could be even worse. From the BOE we need stability and a long term plan. Accepting that the World is not a stable place we need professionals who can act to mitigate the instability in the best interests of the UK, not leaving it to here today gone tomorrow politicians whose knowledge of financial prudence is to say the least sketchy.

  24. IanT
    October 17, 2022

    It looks pretty certain that the Fed will hike their rates by at least another 75 basis points before long. Other central banks can dither all they want on rate increases – but if they don’t catch up, then ‘money’ will move into Dollars even faster then it is doing so at the moment. Most US commentators are expecting the Fed to plateau at about 5-6% next year. Given that US inflation is currently at over 8%, that’s still an effective negative rate of 2-3% assuming US inflation doesn’t go higher. I cannot see how the BoE and ECB can hold rates down given this upward pressure from the Fed.

  25. William Long
    October 17, 2022

    And of course the Bank, and its Remainer allies, are delighted to be able to throw the blame for this incompetence on the Prime Minister.

  26. IanT
    October 17, 2022

    Warren Buffet once made his famous remark;
    ā€œIt’s only when the tide goes out that you learn who’s been swimming naked.ā€

    Well we are going to find that out very soon I suspect…

  27. No Longer Anonymous
    October 17, 2022

    The Bank is clearly political. Conservatism is effectively banned in the Western World. Ā£500bn unfunded Covid bill OK, Ā£90bn unfunded energy cap OK. Ā£45bn ‘unfunded’ tax cuts all hell breaks loose.
    ———————–
    It’s about time we ignored the eco protesters. Let the traffic flow on the Dartford Bridge. This sort of disruption cannot go on. Yet again I was dealing with an unconscious drug abuser last night – tattoos all over his face, stinking and pissy and I had to handle him under direction of the Ambulance operator, causing massive disruptions to the public.

    Yet again I am working the rest of my shift stinking of drug addled tramp and feeling infected somehow .

    Has there been a mass prison breakout in Britain recently ?

    THIS is the direct consequence of socialist Tory policy – reversed Darwinism. Reward of everything wrong and punishment of everything right.

  28. a-tracy
    October 17, 2022

    I’m not going to pretend to understand how you can issue Bonds out of thin air. But how much of this magic money was raised by the UK Bank over the past five years?

    Last night I was trying to get my husband to explain the consolidated annual accounts of the EU to me. I know!

    The EU bank issued EUR 71 billion in bonds for NGEU (Next Generation EU). The PSEO is a notional (virtual) fund with defined benefits in which staffā€™s contributions serve to finance their future pensions. Although there is no actual investment fund, the amount that would have been collected by such a fund is considered to have been invested in the Member Statesā€™ long-term bonds and is reflected in the pension liability that is registered in the annual accounts of the European Union. Member States jointly guarantee the payment of the benefits pursuant to Article 83 of the Staff Regulations and Article 4(3) of the Treaty on European Union (see COM(2018) 829 for a detailed description of the scheme).

    We throw these billion-pound figures around without explaining what underwrites them. So does this mean as the EU has linked them to long-term EU pensions, we are on the line for these bond repayments as well as the 60% of the public working for SMEs are on the line for public sector pension bonds and guarantees with no one guaranteeing theirs?

  29. Richard1
    October 17, 2022

    Yes the Bank of England is responsible for much, and still gives off mixed and confusing signals. But we cannot escape the absolute mess which Liz Truss has made, she was clearly the wrong choice as leader. Apart from anything else, under even slightly hostile questioning she is incapable of thoughtful and articulate responses. Did MPs who have seen her up close and worked with her not realise this when supporting and recommending her? The argument for truss was her tax policies were better, and for Sunak that he was much more polished and articulate. Now weā€™ve got sunakā€™s tax polices but truss as the mouthpiece!

    Although it will make us look very silly I assume there has to be another change. Is the Conservative Party really going to fight the next election telling the country that Truss is to be PM for the following 5 years? Unless there is some kind of economic miracle between now and then, obviously not. So working back from there at what point does she get ditched?

    1. Donna
      October 18, 2022

      The de facto Prime Minister Hunt and his Remainer backers have no mandate whatsoever for anything he is doing. The only “democratic” shield they have is Truss remaining in No.10 and called Prime Minister. So they’ll keep her there as long as she does as ordered and as long as she remains useful. A living “El Cid.”

  30. BW
    October 17, 2022

    So are we saying that the benefits of Brexit in reducing taxes is only if the markets allow it. The Markets appears to be happy with Mr Hunt tax and austerity mumblings So shedding Brussels as our masters was futile as another master just popped up. Thatā€™s before all the anti British quangos and nations and of course the BBC have their input. I thought we voted for sovereignty. Seems we are not allowed to run anything.

    1. Mitchel
      October 18, 2022

      If you are not solvent,you are not sovereign.It is as simple as that.

      Suez gave you an inkling of that.

      1. anon
        October 19, 2022

        Yes – but why pretend- unless you like it that way. They could work to become solvent and sovereign.

  31. Lynn Atkinson
    October 17, 2022

    Time we stopped pretending that the BOE is independent and got elected people in charge so that the jobs-worths who see only their own objective in isolation are subservient to an overarching policy – preferably that of our sackable Government!

  32. Lynn Atkinson
    October 17, 2022

    I understand that the Parliamentary Party donā€™t want the membership to ā€˜choose the next PMā€™ from their shortlist.
    The membership donā€™t want MPs to ā€˜choose the shortlistā€™ and donā€™t want Central Office to produce a candidates list!
    That is the critical in-house reversal that needs to take place to save the Conservative Party.

    1. Mark B
      October 18, 2022

      Lynn

      Those that are in the Conservative Party have to ask, “Whose party is it ?”

    2. NBill Brown
      October 18, 2022

      It cannot be saved

  33. Bert Young
    October 17, 2022

    There needs to be a close co-ordination between the B of E and the Government . The recent turmoil need not have happened if the two had worked together . World-wide inflation cannot be ignored when the UK attempts to attract investment . The talents that are capable of growing our economy are restrained when the major economies ( USA and China ) are in reverse . Money does not grow on trees .

  34. formula57
    October 17, 2022

    Clearly “We need stability of policy and clear signalling of intentions” and so perhaps some new personalities at the Bank?

  35. am
    October 17, 2022

    Bailey’s incompetence illustrated by last week’s contradictory statements which caused huge bond market volatility earned his dismissal.
    He has survived though because Truss doesn’t have any fight in her.

    1. Donna
      October 18, 2022

      Bailey’s statements last week weren’t a result of incompetence: he was deliberately destabilising the economy on behalf of the Globalists in order to stop Truss from carrying out her plans.

      The Globalists can’t possibly have a highly competitive economy created when the EU is a basket-case and the Euro is going through the floor.

  36. Nottingham Lad Himself
    October 17, 2022

    “The Bank of England fights itself”

    This.

    Coming from…the Tories.

    Oh, my aching sides…

    1. Mickey Taking
      October 19, 2022

      you should see a doctor.

  37. anon
    October 17, 2022

    So how is the BOE going to hit its inflation target if it the only tool it can use is to buy GILTS but effectively never sell them? We need constitutional limits on the power to create money. This wont prevent it but it highlights the problem in an open way.

    When the Fed increases interest rates next meeting? Are we just going to absorb the import inflation and consequent depressed world demand.

    If that is the case the returns to bond holders will fall as the money eventually repaid will be less valuable. The private holders may wish to sell. The Pension funds that in retrospect high risk derivatives need thorough investigation. Why was this scenario not envisaged by the trustees or boards? or indeed the banks selling the products or the regulators.

    Why were are pension funds forced to hold GILTS or bonds at all?

  38. Iain Gill
    October 17, 2022

    Re Mr Hunts nonsense announcement, I cannot support this. Measures like IR35 actively discourage wealth creation, the very wealth we need to earn our way out of this mess.

    The next election is now lost to the Conservatives. I just hope some new party forms as Labour would be just as bad for the country as these clowns.

    What an absolute mess. If I was a back bencher I would be resigning my seat now.

    1. Shirley M
      October 18, 2022

      Every decent, honest, patriotic and democratic MP should be resigning! The CONS are the antithesis and the other main parties are just as bad. We have ALL been betrayed by so called politicians.

    2. Mark B
      October 18, 2022

      Getting rid of IR35 and Overseas Development, along with a slew of other regulations would have been far far better.

  39. Mike Wilson
    October 17, 2022

    The farce becomes more farcical! Is that possible? Fiscal event reversed! It didnā€™t happen! Now weā€™re back to normal. Tax at a 70 year high and going higher. The Labour Party doesnā€™t need to win power. Theyā€™re already in power.

  40. ChrisS
    October 17, 2022

    Just listened to the Chancellor’s statement on TV. He has rowed back on everything he possibly could have, even the energy support plan which will no longer run for two years, but will inevitably be less generous to larger households from April. I suspect that the support package will be limited to a certain amount of energy, equivalent to that used by smaller properties, and might even be made taxable. Pity Sunak wasn’t more careful over his ridiculously over-generous furlough scheme.

  41. Bob Dixon
    October 17, 2022

    So Baily can have some influence in the bond market if he controls 33%?
    Can he control his two committees?
    Can he get them to sing from the same Hymn sheet?
    He has taken over at a very difficult time as we try to return to old practices.

  42. Trod
    October 17, 2022

    When inflation began to rise, in 2021, we were told by the Fed et al. it was only temporary, implying short lived.
    Everything is temporary, so itā€™s more useful to express temporary phenomena in terms of timescale.
    It appears the timescale for inflation is longer than was anticipated by these so called experts.

    1. miami.mode
      October 17, 2022

      The phrase on inflation was “to see through it” – problem was that they were looking through the wrong end of the telescope.

  43. Ian B
    October 17, 2022

    Although seemingly unconnected with today’s topic of banking, there is very little going on anywhere that isnā€™t tied into one situation or another.

    The Government has been in a pickle for some time now and it simply boils down to playing the ā€˜sound-biteā€™ without a plan to make it work. Boris Johnson went head-on in to his eco net zero dream, thought he had implemented it by dishing out punishment to all – without a real answer to the question of what does it mean to the UK economy.

    The BoE is floundering around with someone that by all accounts has a record of failure. Recently he has even managed to criticise his own abilities in his previous post while seemingly suggesting it wasnā€™t him. It is following others, and fails to react to the real world, – sort of ā€˜lets do thatā€™ because others are saying so.

    I didnā€™t agree with the way the Conservative Party elected their new leader, it didnā€™t make sense. Boris Johnson’s failures where not his alone, the Government, the Cabinet is a collective ā€“ with collective responsibility. Therefore those in his Government were the ones responsible for the mess we are now in, so being asked to select a member of team Boris to be the new leader is bizarre.

    Now of course the sore losers are out there in their droves baying for another dismissal another change. Not a single one has is a real plan a real plan, its more I can grab a ā€˜headlineā€™ and get noticed, than it is I was elected to represent my constituents and the country, the new direction, is this because. Another change from the same ā€˜oldā€™ pool will not change a single thing.

    CCO needs to flex its muscles, get those that signed up to project Conservative to pull their necks in or ship out. Above all, heads need to be banged not to just raise taxes, that is failure, but to ensure our structures are affordable and within our means.

    For goodness sake have a real plan first – not just silly headlines

  44. Ed M
    October 17, 2022

    Sunak predicted back in August exactly what has happened with Liz Truss and her economic policy.
    Now Hunt to the rescue of the whole Tory Party’s future (and the future, cause if Labour get back into power, we’re screwed – they might even take us back into the EU. So everyone needs to get behind Hunt).

    1. a-tracy
      October 18, 2022

      You’ve got no chance EdM, people aren’t going to be voting which is always good for Labour as they have more zealot followers. Not even conservative members get their wishes followed, they weren’t even asked or offered Boris to stay on.

  45. Barbara
    October 17, 2022

    With the nation now being invaded on a daily basis, and Ā£2.1 billion p.a. now being needed for the maintenance of illegal immigrants on an ongoing ever-expanding basis, I personally feel this is fiddling while Rome burns.

    1. Shirley M
      October 18, 2022

      Yes, goodness knows what the governments priorities are, but it certainly isn’t the UK, or its people! It seems to be anyone or anything but!

  46. toffeeboy
    October 17, 2022

    From the FT

    “The rally in gilts on Monday came despite the Bank of England ending its emergency bond-buying programme, and governor Andrew Bailey signalling over the weekend that the bank will raise rates more aggressively to tackle inflation.”

    Please remind us Mr Redwood who is responsible for this mess.

    As an aside, it’s clear Brexit is hammering the UK economy. Why are you so reticent to admit this basic truth?

    1. mancunius
      October 18, 2022

      JR has carefully explained how the mess was caused by poor and contrary reactions within the BofE. Surely you must have read it?
      Also, OECD data from June 2016 up until the end of the second quarter of 2022 shows that the cumulative growth rate of real GDP in Italy was 4%, in Germany was 5.5%, in the U.K. was 6.8% and in France was 7.6%.
      That does not demonstrate any superiority for the eurozone or EU economy. On the contrary.
      What is hammering both the EU and the UK is the Fed’s aggressive hiking of the dollar.

    2. a-tracy
      October 18, 2022

      toffeeboy “Page 24 Consolidated revenue ā€“ main developments in 2021 In 2021, the consolidated revenue, comprising all revenue categories, amounted to EUR 178.9 billion, compared to EUR 224.0 billion the previous year. The main reason for the decrease of EUR 45.1 billion or 20.1% was the decreasing impact of the UKā€™s withdrawal from the European Union, which had increased the 2020 revenues by EUR 47.5 billion, but contributed only EUR 1.1 billion to the 2021 revenues.” Source https://ec.europa.eu/info/sites/default/files/about_the_european_commission/eu_budget/2021_eu_accounts_adopted_web.pdf

      So where has our 45.1 billion gone if its not gone to the EU?

  47. am
    October 17, 2022

    The Hunt revision is inflationary and recessionary.
    Yet the media say all to the good.

    1. miami.mode
      October 17, 2022

      Treasury orthodoxy is obviously world financial orthodoxy. Reminds me of that great film Back to the Future where the hero is sent back to the 1950s from 1985 and he is singing a popular song from that earlier period when he then puts a 1980s slant on it and the audience look on aghast to which he says, ” I guess you guys are not quite ready for this yet”.

    2. glen cullen
      October 17, 2022

      And only a week ago described as anti-growth … now its okay
      Its not just the media saying its good, so it more than half of the Tory MPs

  48. Original Richard
    October 17, 2022

    If our new PM is no longer in charge of economic policy then perhaps she can turn her attention instead to the equally important task of stopping the invasion of our country by unidentifiable young men of fighting age, many of whom are now believed to be Albanian criminals.

    And reducing the 1.3 million legal visas handed out last year, which includes ā€œstudentsā€ and all their dependents. Not forgetting the 120,000 Chinese ā€œstudentsā€ in our universities helping us with the development of new technology…

    No, I thought not.

    So weā€™ll just keep increasing the taxes to pay for the free accommodation, free health, dental and social care, free schooling and Ā£40/week pocket money for the illegals, the numbers of which now exceed the size of our army.

    And keep increasing the taxes to pay the tax credits, housing benefit, health and social care, schooling and additional infrastructure on all the cheap, near slave labour continually brought in for our zero skills gig economy, the de-industrialisation strategy of Net Zero.

    Itā€™s not as if massive immigration has caused the inability to get a GP appointment, or the inability to get an NHS operation, or the inability to obtain affordable accommodation, or water supply shortages, or clogged roads, or increased levels of crime, or money sent out of the country, or wages and investment kept low.

    Or the irrevocable changes to our culture, laws and practices made without consultation, let alone agreement, and in fact dead against the manifesto promises to reduce immigration to ā€œtens of thousandsā€.

    1. Shirley M
      October 18, 2022

      + millions, Richard. The millions wasted by this government on unwelcome uninvited ‘guests’.

  49. Richard1
    October 17, 2022

    I guess its just possible Truss could be a strong advocate for other supply side reforms – planning reform, a re-look at Solvency II, Mifid II, GDPR etc. But the benefit of such reforms will be much harder to quantify (although they are undoubtedly real). Perhaps there are some big headline cost cutting measures also. HS2 is the obvious one. Today we see the MoD has wasted Ā£5.5bn on a useless new tank which is to be abandoned. I think it will be tough though, and I can’t see how Liz Truss will have the credibility for it. A pity, as it has been refreshing to hear real free market advocacy from a Tory PM again after all these years. But its no good if you stuff up the execution.

  50. formula57
    October 17, 2022

    O/T – Lest we forget and there is benefit now in remembering, Neville Chamberlain did not relinquish the party leadership contemporaneously with resigning as prime minister but only some considerable while later.

  51. glen cullen
    October 17, 2022

    If its not ā€˜herā€™ planā€¦whoā€™s plan is it
    Is Liz now part of the anti-growth syndicate
    Whoā€™s wagging the dog

  52. John Hatfield
    October 17, 2022

    Despair.

  53. Your comment is awaiting moderation
    October 17, 2022

    Just when you think things couldn’t get any worse along comes Jeremy Hunt.

    1. glen cullen
      October 17, 2022

      and the new BMW EV mini is going to be made in China rather than Oxford

    2. glen cullen
      October 17, 2022

      The price of charging an electric car using a public rapid charger is now more expensive than filling up with diesel according to data gathered by Parkers

      1. miami.mode
        October 18, 2022

        ….but at least the VED is free!

        1. Mickey Taking
          October 18, 2022

          for now ! – mark my words.

        2. glen cullen
          October 18, 2022

          classic

      2. Donna
        October 18, 2022

        I met my son in Marlborough at the weekend. He parked his hybrid car in the main car park in the two spaces (out of about 400) with electric chargers and which are reserved for electric vehicles so they can charge them. The chargers didn’t work. So if the car was fully electric, he wouldn’t have been able to get back home unless he went off on a hunt elsewhere for a working charger.

        Yet supposedly, we’re all going electric in 8 years’ time. It’s a joke.

  54. George Brooks.
    October 17, 2022

    Partly due to the ineptitude of the Bank of England and the disgusting behaviour of many of Rishi’s supporters we have now come full circle in 12 weeks and got absolutely nowhere as confirmed by Hunt’s statements today.

    Party supporters count for nothing. We have been through 3 years of nausea following the referendum before the result was implemented by Boris. After that he went ”liberal” and was shoe-horned out.

    130 or so MPs wanted Rishi as PM but we, the supporters, didn’t, as he is under the spell of Davos and the globalists. That has not stopped them trashing the reputation of the party in order to get their own way and inflicting un-told damage on the UK.

    In effect they have given the key of the door to Starmer and the SNP which will go down in history as the beginning of our 100-year slide into poverty and chaos very similar to that of Argentina.

    1. Jasper
      October 17, 2022

      George – Is it the globalists that control the bond markets? Have they forced this on us, if so why?? It would appear the Government have no control and neither do the Bank of England, so who does??

  55. jerry
    October 17, 2022

    Yawn, who cares about the BoE when the Tory party, if not the Govt,” fights itself”…!

    A recent opinion poll conducted before the the omni-shambles this afternoon suggests, should there be a general election, Labour would likely have a majority EXCEEDING that of the 1945 Attlee landslide. šŸ˜„

    1. jerry
      October 17, 2022

      Sorry but Ms Truss is both politically incompetent and a continuing electoral liability, she might well be a very capable technocrat able to follow others polices and procedures (we all know the FCO is run by Civil Servants, not politicos…) but she is no ‘Commander in Chief’. If walking out of a No.10 press briefing on Friday because the questions were hostile/hard wasn’t bad enough, today she cried-off from answering a unwelcome UQ in the Commons, the excuse being her diary was full, despite the fact that the UQ was at a time No.10 had already suggested her diary was or had been cleared so she would be in the Commons for originally timetabled emergency statement by Mr Hunt. Yet she couldn’t even manage to maintain that illusion by delaying her entry until after the (new) Chancellor had started his statement, no, she walks bold as brass into the chamber during the UQ along with Mr Hunt! If she isn’t going ton resign, nor be forced out, can someone book her into RADA for some acting lessons…

    2. Peter2
      October 17, 2022

      Two years untill the next election.

      1. jerry
        October 18, 2022

        @P2; You really do not understand democracy do you…
        Yes the next general election is two years, assuming the Tory party doesn’t split, or lose its majority due to defections [1] or by-elections caused by resignations. A democratic govts can only govern if they have the will of the house. Even then, assuming the govt maintains a majority for two years, they would need to be scandal/sleaze free, and then of course the electorate having developed a very thick skin these days it has become hardened to election lies and ‘promises’.

        The concept of ‘TINA’ died long ago, what worked 30 plus years ago doesn’t anymore, history & fact-checking are now just a few clicks away using the internet, never mind those facts being delimited by social media (rather than the print media as before), nor will the suggestion that only the hard right wants economic growth, everyone from the far right to the far left wants economic growth, they might want it for different reasons but they want it non the same! As for the tax cut lie, during the 1950s the UK had a quite, if not very, high levels of income tax, yet that decade saw massive economic and social growth, so can we please bury the idea that only low rates of tax bring about economic growth, low tax simply brings personal wealth, not economic growth as measured by GNP/GDP.

        [1] some so called “red wall” seat Tory MP’s will likely have little to lose, indeed even some ‘blue wall’ seat MP’s might feel the same, the Tory party could well be heading towards their own ‘SDP’ moment.

        1. Peter2
          October 19, 2022

          Gosh Jerry what an essay.

      2. NBill Brown
        October 18, 2022

        Peter 2

        And so what?

        1. Peter2
          October 19, 2022

          Another fascinating comment from eubilly

          1. hefner
            October 25, 2022

            As fascinating as yours P2. We learn so much from your knowledgeable criticism of jerryā€™s post. Your arguments are so well developed, you really are a master of the decent debate.

            Keep on the good work, and BTW the NoFit State Circus is recruiting and has some openings for clowns.

  56. mancunius
    October 17, 2022

    O/T – but urgent: Sir John, you and other like-minded Conservatives should urge Truss to call an immediate General Election (she has the discretionary right to do so as PM) and go to the country on her policies, having first replaced Hunt with Badenoch, and having told all the anti-democrative crypto-remainer Tory MPs they are excluded from the Party and not allowed to stand as Conservatives.
    The window of opportunity for this move may only be a week, max.

    1. jerry
      October 18, 2022

      @mancunius; “having told all the anti-democrative crypto-remainer Tory MPs they are excluded from the Party and not allowed to stand as Conservatives.”

      Remind me, how Ms Truss voted in the Brexit 2016 referendum…

      PS, have you not seen the latest opinion polls! šŸ˜„

  57. Stephen Reay
    October 17, 2022

    Sir Jon asked” if the UK faced a recession “. Unbelievable.

  58. Lynn Atkinson
    October 17, 2022

    Off topic. You need to know this.
    ā€œI don’t want to sacrifice any more Russian soldiers in a guerrilla war against hordes of fanatics armed by NATO. We have enough forces and technical means to bring Ukraine to complete surrender” – Sergey Surovikin

    1. anon
      October 17, 2022

      Note. China has advised all its citizens to leave.

  59. Cuibono
    October 17, 2022

    What a truly TERRIBLE day this has been.

  60. IanB
    October 17, 2022

    Infighting, infighting in every area of the State. They all want more control and to milk the taxpayer with their empire building. For a change let’s have some good housekeeping, live within our means, reduce the State down to a level that the taxpayer can afford not the other way round. Oh.. thats Thatcherism.

  61. NBill Brown
    October 18, 2022

    Sir JR

    Are you still supporting Liz Truss when 55 pt of members are asking her to resign?

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