The Sunday Times ran a topical joke.” Two members of the Bank’s Monetary Policy Committee walk into a bar. You’d think one of them would have seen it”. It is not good when the Bank’s ability to forecast and to carry out its main task of keeping inflation to 2% is cause for wide ranging ridicule and censorship. Let me try and explain a little more why inflation is so high and who is to blame.
The first thing necessary to have a more adult debate is to understand the very considerable limits on so called Bank independence. When the Bank first starting printing more pounds to buy up more bonds in the policy called Quantitative easing the Chancellor, Mr Darling, insisted on the Treasury agreeing the sums. The Bank wanted an indemnity against losses on the bonds from the Treasury and taxpayers, so the Chancellor demanded the he and his successors signed off the amounts of any such policy. All Chancellors since have done so and continued the indemnity.
The second thing to grasp is that the main reason inflation has set in badly here, in the USA and in the Eurozone is that all three central banks printed too much money. The Chinese and Swiss Central Banks did not do this and their countries have today inflation around 2% despite also experiencing the sky high energy prices and rising food inflation. Countries like Turkey and Argentina which have printed even more have much higher inflation rates.
So we need to ask why did the Bank of England recommend and execute a policy of creating an extra £450bn and buying bonds with it from 2020 to end 2021? They decided that the large contraction in economic output triggered by the wide ranging and long lasting lockdown of the economy from March 2020 required a substantial monetary offset. As rates were already low and they thought they could take only them down to 0.1% they needed to inject large sums of additional cash into markets. They were also conscious alongside the Fed that in March 2020 the fears of the impact of lockdown were causing a financial and banking market collapse which needed large sums in liquidity to offset.
I think their judgement in March 2020 was right and I strongly supported it. I also supported the Treasury action it made possible, of borrowing huge sums to return some income and cash to the many people and firms that were losing income from the shutdowns. The two actions went together. The state could only borrow that amount at a very affordable rate if the Bank printed money to help them. The impact was not inflationary overall as so many activities were stopped or greatly reduced by the controls.
Unfortunately in 2021 the Bank continued to print money and keep interest rates on the floor long after a good recovery in activity had taken hold. The government continued to borrow and spend on huge scale on a series of special programmes where test and trace was the largest. This was bound to be inflationary, though the Bank ignored those of us who warned it to stop printing. The government continued with expensive lockdown style policies for longer even though vaccines and treatments had greatly reduced death rates from the virus . The economy revealed a number of crucial supply bottlenecks as lockdown measures had damaged UK and global capacity in various areas.
China and Switzerland show that even with sky high energy and dear food it was possible to keep inflation down. The Peoples Bank of China have monetary targets and think controlling the amount of new money is an important part of controlling prices. The Bank of England do not bother to monitor and control the amount of cash . They prefer to believe the unlikely proposition that if you print a load of money and give it to people and businesses they will use it less. That was true in lockdown but they wanted to spend when lockdown tailed off. Maybe the Bank should start to take money growth more seriously.
It was a pity that China who got inflation right was busy trying to correct a credit bubble in property they had allowed. There are many features of the China approach it is better not to follow. The question for Bank of England MPC members is when you saw those piles of cash you were printing, why did you think people would not use them? Or was it you did not see them because you did not bother about the money supply?
May 16, 2022
Good morning.
Smart move by the BoE. Alas this is perhaps the main reason why we are paying so much in taxes. That and the governments refusal to cut spending.
There was money to be made and Minsters suddenly had a lot more power and less scrutiny than before. So no wonder they were so reluctand to return things back to normal.
Our currency has been debased over many decades due to the belief that GDP is the main benefit of an economy. It is, and it isn’t. What is important and why the Conservative government of Mrs. T got things so right, was the belief in maintaining the value of ones currency. This is what the Swiss do.
When so much money is chasing too few goods perhaps it is time to print less
May 16, 2022
Wrong question from our host; it should be, WHY did the BoE create do much new money, knowing that it would be massively inflationary?
BoE are not inexperienced.
May 16, 2022
+100
To crash the economy ready for The Great Reset?
As you say, they could not have not known what would happen!
And if they truly didnât knowâŠwhy are they in charge of the economy?
May 16, 2022
E,
I am not sure these are the right questions. Why did the govt allow it and not have the courage or leadership to intervene and steer the ship UK along the right path. Alternatively did chaotic misfit Johnson see it as a way to waste even more money. I seem to recall he marvelled at the way the Treasury and BOE interdicted.
Again, I see this as a pass the blame blog for the pain we will all feel because of this govtâs total lack of competence. The repeated answer from Johnson and Sunak is tax them more. Even though it broke another key promise to the electorate.
If JR was chancellor would he have spoken up? If JR was chancellor would he have forced Johnson to take a different route? So why is JR not in cabinet giving his sage advice?
May 16, 2022
Can I post this link again plz?
âDo not sign any WHO Pandemic Treaty unless it is approved via public referendum.â
https://petition.parliament.uk/petitions/614335
It has now reached 98,097
Are people waking up?
May 16, 2022
Its now over 100,000 so should go to parliament debate
May 17, 2022
No, Parliament will consider it for a debate. Not the same thing as
âshould go to parliament debateâ.
There might be a reason why English has âshould, would, ought to, shall, will, might, may, can, could âŠâ
May 16, 2022
Correct. I believe they knew it would inflate away other Government debt.
May 16, 2022
The right question, Peter. Especially since the BoE is supposed to have been freed years ago from political control.
May 16, 2022
Peter,
The BofE created lots of money because:
1. Other central banks were doing the same and they all follow Group Think
2. It appeared to work in 2008 as the economy didn’t collapse after commercial banks got into trouble.
Reality of course is different. The QE from 2008 led to asset price inflation and rewarded poor risk management practice. Over the last 15 years the problem has got worse. Finally in 2020 the cash distributions reached people who would buy goods not assets and good inflation took off.
Incidentally, real interest rates are at a record low right now. Minus 6% in UK (1% base rate less 7% CPI), same scale in USA and EU. This will cause the money printing to continue in the private sector and stoke more inflation.
May 16, 2022
Yes.
A question though is why interest rates were held low for years after 2008? Was it to hide bad loans by rolling over the ‘loans’ at effectively zero % interest rate – so kicking the problem down the road and hoping it would eventually go away?
May 16, 2022
The prescription for curing inflation risks killing the doctor. Which is why Messrs Johnson and Sunsk are unlikely to switch into Reagan-Volker mode, and likely to opt to kick the can down the road and make matters worse.
May 16, 2022
Sunak is certainly a tax, borrow, over regulate, print money and piss it down the drain socialist and yet he keeps pretending to be a tax cutter. Does he think anyone is fooled? Is he trying to fool himself? His tax and NI increases are vast.
May 16, 2022
I suppose that the speeding motorist could write a long piece about what was wrong with the council that cause him to hit that small pothole which sent him hurtling into the school bus queue too.
May 16, 2022
Emmotive rubbish.
May 16, 2022
Totally agree agricola
May 16, 2022
As you correctly say:- The question for Bank of England MPC members is when you saw those piles of cash you were printing, why did you think people would not use them? Or was it you did not see them because you did not bother about the money supply?
But we also know that while Andrew Bailey was in charge of the FCA they gave bank customers one size fits all personal overdraft rates. This raised rates to 39% or even 78% even for very low risk borrowers who were perhaps paying just 2% over base previously. If this is not proof that he and the FCA are innumerate, unable to judge risk and unsuitable to run a whelk stall or even a piggy bank then what is? Interestingly these very same banks do you charge these rip off rates overseas. They are just saved for lucky UK customers thanks to the FCA. 39 times or more the current base rate!
May 16, 2022
âNHS bureaucracy has doubled since the start of the pandemic despite little change in the size of the frontline workforce, with nurses increasing just 7%, a new report reveals.â from the dailysceptic.org
The UK state sector in general I suspect more and more âworkersâ less and less useful output.
May 16, 2022
Have just seen a bit of BoE governor on television and it’s obvious that in long windedness he would graduate with honours, but it seems that as usual BS baffles brains.
May 16, 2022
+1 all due the the âwarâ nothing to do with the BoE or myself.
May 16, 2022
Worse than Mark Carney
May 16, 2022
Yes, Sir John, ‘the two actions went together’. Lockdowns were wrong and inflationary money-printing was wrong, in 2020, just as in 2021. Sweden did neither, and got it right.
May 16, 2022
+1
However much they say lockdowns are wrong, along with their economic consequencesâŠthey want MORE.
May 16, 2022
Indeed the idea that Boris got the big things right is clearly complete tosh. Most big things Boris/Carrie/Sunak got completely wrong:- the extended lockdowns, Sunakâs vast tax increases, eat out to help out, the very wasteful support businesses with much fraud, the test and trace joke, the pandemic planning, the joke HS2, net zero, not fracking, PPE procurement, dumping infected people into care homes, the vaccination of the young and children seems to have done much net harm, the soft loans for largely duff degrees, the enforced vaccinations for certain jobs, the enforced masks wearing, the structure of healthcare and education funding, the anti-car road blocking agenda, the hydrogen and ârenewablesâ agenda, the EV car subsidies, the NI issues, the deliberate inflation ⊠it seem they are about to get the oil & gas company windfall tax wrong too.
May 16, 2022
On the dire NHS Boris please read Angus Dalgleish – The four crumbling pillars of the NHS – The Spectator. This would be a good starting place for you & Javid. Certainly do not listen much to the deluded Jeremy Hunt with his book Zero.
May 16, 2022
LL, Agreed. The history books should not be kind on BoJo. You didn’t mention taking any wins from EU exit either: Freeports, agricultural subsidy change, chopping Solvency II, list could go on.
Ironically Trump’s “Build in USA, source our own fuel” mantra looks remarkably foresighted now…
May 16, 2022
+1 and the many attacks on landlords and the self employed.
May 16, 2022
The list is long and getting longer every day…..Boris will screw up the NIP today, but will tell the DUP while on his visit to Northern Ireland he’s doing ‘everything he can’
May 16, 2022
Hear, hear, Lifelogic! Couldnât agree more!
A very long list.
May 16, 2022
The government is happy to inflate away its debt and our savings.
It’s all part of the great reset.
The countries that didn’t follow this orthodoxy don’t want any truck with WEF .
I see Bozo is going soft on the NIP. We didn’t expect any different.
The man’s a charlatan.
May 16, 2022
Sweden’s excess death rate was significantly higher than neighbouring Norway, Finland and Denmark.
If Sweden got it right, how come it did much worse than its neighbours?
May 16, 2022
Perhaps Sweden is a much more densely populated nation with most of its citizens living in three main cities.
May 16, 2022
Have you ever been to Norway, Denmark or Finland?
May 17, 2022
Is that your best answer?
May 16, 2022
Nick Timothy today in the Telegraph:- âThe modern Royal family is in danger of becoming too political
Charles must beware: the success of the monarchy depends on its ability to rise above the frayâ
What does he mean by âin danger ofâ? Both Charles and William have foolishly been absurdly political. This particularly with their deluded climate alarmist agenda, where their blatant personal hypocrisy is breathtaking. Also where most of the public, quite correctly, think climate alarmism is a best a huge exaggeration & at worse a gigantic fraud.
You cannot spend millions PA on your private jets, helicopters, Aston Martins, car convoys and heating your many mansions and then order âcommonersâ that they cannot drive to work or have a weeks holiday in Spain. Unless you want to be booed that is. Too late for the deluded green crap dope Prince Charles but perhaps Prince William can just about roll this back sufficiently. The Queen sets the perfect example William follow her – long live the Queen.
Mr Speaker Hoyle, football fans (indeed people in general) are perfectly entitled to boo whatever or whomever they wish to boo, it is called free speech. Also Sir Christopher Chope MP is perfectly entitled to draw attention to the many cases of Vaccine induced injury. You are becoming almost as dire and irritating as the appalling speaker Bercow. Well perhaps not quite but heading that way!
May 16, 2022
Quite right.
Telling people to heat less, eat less, travel less all the while you do both the opposite and live the high life does not sit well with people struggling to make ends meet. If he were alive today I am sure ex President Nicolae CeauÈescu would agree with me.
đ
May 16, 2022
+1
May 16, 2022
+1
He certainly would agree.
Funny how with all the warnings from history people are still bamboozled by communism.
Fooled by gingerbread houses.
May 16, 2022
Government of the gentry, by the gentry, for the gentry
May 16, 2022
LL:
The reason why the Liverpool fans booed Prince William is because they hate the âToriesâ, and it goes back to the time of Mrs. Thatcher(they said), and how
her Government treated Liverpool. Also, they referenced Hillsborough, as one of the reasons they booed. Social Media was awash with comments from âfansâ saying how much they love to be hated.
No matter what the reason, it was a disgusting display, and to drown out the words of âAbide with meâ, was equally disgusting. There is no excuse for it.
May 16, 2022
Certainly, in other areas the fans are highly controlled regarding âfree speechâ.
So being allowed to boo in this case had to be down to left wing politics.
Mark B referred to CeauÈescu.
Would those fans really prefer that scenario to a royal family?
Too weak from starvation to boo.
May 16, 2022
I can well understand their anger over Hillsborough after 30 years of blatant lies and cover ups by police, courts and politicians blaming the victims. How long will the net damage done to many young people from the COVID vaccines be covered up? Have they compensated for the the contaminated blood yet circa 40 years?
May 16, 2022
There is surely a lot of Irish republicanism present too.
May 16, 2022
Ah, Hillsborough. The only football match in Liverpool’s history that their fans didn’t spend the previous two hours in pubs near the ground.
May 16, 2022
Yes but that was not remotely the cause of the tragedy was it?
May 16, 2022
“Too political” for you translates as “insufficiently implicitly right wing”, evidently.
May 16, 2022
Not at all. If Prince Charles comes out with any controversial policy right or lefts like the EU, Climate Alarmism, the BBC poll tax, the future of NI… it will annoy a proportion of the population. For a future King or Queen this is a big mistake just keep out of it. Otherwise you will be disliked by many just as Blair and Thatcher are by large groups of people. It is one advantage of having a royal family but they are squandering it.
But clearly on climate alarmism he is totally deluded too.
May 16, 2022
They should not come out either way on political issues, but if they must do it is even worse if they get it wrong as they clearly have (hypocritically too) on climate alarmist.
May 16, 2022
NLH it is nothing to do with Left,,Right, or Centre. It is a matter of choosing practical paths that from experience are known to work and avoiding those that historically have failed. Politics have no place in mathmatics.
May 16, 2022
I agree regarding the Royals. Charles has interfered in political issues all his adult life and in my opinion is not fit to be King and I’m sad to see that William has decided to copy his father rather than learn from his Grandmother’s vastly superior example.
The day our beloved Queen passes on is the day I become a Republican.
May 16, 2022
Saying absolutely nothing about the often awful consequences of bad policy is also interfering.
It sends a very strong message that there is nothing morally wrong with those policies.
No, the Royals should not comment on legal or political particulars.
However, it is absolutely proper that they comment on the morals of the nation, and if those are such as to cause the election of cynical politicians, then that does not make such comments political, however much those with red faces may try to claim that they are.
May 16, 2022
+1 still time for Prince William to learn the obvious perhaps? Long live the Queen.
May 16, 2022
Iâm happy for the UK to become a republic after our current Queen, so long as we donât establish a proxy head of state as a replacement to the monarchy
May 16, 2022
People were determined Edward VII would be no good, but he was, and very much loved too.
May 16, 2022
Look at La Garde Republicaine performing for the Queen at Windsor in their Louis XV dress, and then observe them doing the same, in post revolutionary dress, for President Hollande and his slouching entourage in Paris. That is a tiny taste of what it would be like.
May 16, 2022
LL Do you think the Hats off Strangers procession turns their heads when they are of humble origin? (Though it didn’t with their predecessors.) Hoyle was fine as a Deputy Speaker.
May 16, 2022
I have loved the Royal family, with all itâs pomp and ceremony all my life. However, since the Royals, led by Prince Charles (Prince of Wales feathers as the logo on the speakers background in Davos!), got involved in the politics of the green agenda, I have lost a great deal of respect. Are they naive or complicit in the idea of the great reset.
Itâs clear that the green agenda does precious little for the environment- quite the opposite in many cases.
May 16, 2022
+1
May 16, 2022
Lifelogic
Agreed. How sad that neither Charles and his sons have learnt from HM the Queen who has set a remarkable example over her distinguished reign.
Keep out of politics and if you must talk do it behind closed doors
May 16, 2022
+1
May 16, 2022
[…] Read more about Why the Bank got it wrong […]
May 16, 2022
SoâŠwhen Johnson has signed us up to the Pandemic Treaty and a China-style lockdown is decreed âŠ..WHAT are these economic genii going to do then?
If we are signed upâŠ.it WILL happen and soon, I would imagine.
Listen to what the âhealth expertsâ are saying.
Monkey poxâŠloads of new Corona viruses âŠno end in sight!
May 16, 2022
….and then the ‘World Bank’ will have to take control
May 16, 2022
Oh gosh yes!
To help us âŠto save us from ourselves!
May 16, 2022
John’s made his case now he should demand the resignation of the Governor of the Bank of England
May 16, 2022
He is clearly totally unsuitable and surely innumerate. Carney was dire too. Why are they so poor at choosing people for this ~ ÂŁ500k+ PA plus pension job? Do they only want green crap pushing innumerate fools so they can push them around and blame them perhaps?
May 16, 2022
He should have seen the invasion of Ukraine coming and planned for it.. now we are behind the curve playing catchup
May 17, 2022
He did plan for it, Jason. As did Biden. It seems to be working out so far. Russia bogged down in Ukraine, NATO enlargement in Scandinavia, what could be better?
Energy shortage, food shortages, inflation through the roof? Never mind, that’s by the by.
May 17, 2022
Demanding the removal of everyone who does not share your frankly unhinged views is not a recipe for a successful and respected country.
Look where it has got Russia.
May 17, 2022
Yes, look where it’s got Russia, lad. The rouble is the ‘best performing currency this year’ (Bloomberg).
May 16, 2022
Two politicians walk into bar after Abandoning cheap, plentiful and efficient fossil fuels in favour of inefficient and expensive (tax payer subsidised) so called green energy.
Thatâs ÂŁ100 a pint said the barman because of the cost to deliver the beer and the eye watering taxes. Did you not see this coming?
May 16, 2022
+1
LolâŠagree.
Why are they so blasé about it all.
Have they been assured that the terrible consequences of greencr*p will not harm them and theirs?
Oh..maybe they all have huge investments in wind farms and heat pumps?
And whiskey.
May 16, 2022
It was our gold bar.
They were under the influence of gambling and lost all values.
May 16, 2022
Not just âspot-onâ but youâve gotten to the crux of the issueâŠ..everything stems from net-zero
May 16, 2022
Ah Javelin, did you not realise, booz for our betters is also subsidised ?
đ
May 16, 2022
People are always surprised when they identify waste and inefficiency in their companies and business and get the reply ” well it was not my money” With all that is going on all around them is it any wonder the common struggling people think and act in this way?
Whatever happened to leading by example?
May 16, 2022
Sunak is trying to control inflation by increasing taxes so people have less money to spend – the frozen tax thresholds, the massive increase in corporation tax, the NI hike etc.. That is an absolutely core plank of Modern Monetary Theory (MMT), the latest fashionable “progressive” (ie. left-wing) magic money tree policy that says governments can and should just print as much money as they need with no concern about the resulting debt. It seems a curious idea given the history of hyper-inflation in countries who have tried a form of it, but it seems Sunak is sold on the idea. It is popular in far-left USA politics so maybe he heard about it there on one of his green card visits. Why he is in the Conservative Party in UK is a more puzzling question.
May 16, 2022
+1 R G.
‘Theory’ indeed. It has yet to work in practice.
May 16, 2022
This article should really have been titled “Why the Government got it wrong.”
Because, although the BoE has made appalling errors, the catastrophic one was the Government’s decision to lockdown the country and wreck the economy over a Low Consequence Infectious Disease which they knew had low mortality rates.
Sweden, which used OUR sensible Pandemic Plan, didn’t lockdown. It had a better outcome in terms of excess deaths than most of Western Europe, including the UK. It didn’t wreck the economy, or millions of lives. And it doesn’t now have rampant inflation.
I believe in pointing the finger at the real culprits: the Government and all those who supported the idiotic lockdown policy.
May 16, 2022
Donna
It would have beena much shorter entry if it had had the title of:
What the Government has got right.
May 16, 2022
+1 Donna.
I am right behind you on this and said much the same in my comment yesterday.
May 16, 2022
How can this not bee foreseen one wonders?
Could it possibly be that many people benefited from printing money and saw their asset prices increase (not least house prices) so many a blind eye has been turned?
Follow the money – it’s only the little people who are being shafted.
May 16, 2022
+1
‘Five of the countryâs 10 richest people own companies that have furloughed workers through the scheme, in which staff are paid 80 per cent of their salary by the government… Some of the biggest users of the scheme have put tens of thousands of staff on the taxpayerâs payroll.’ Daily Mirror May 2020.
May 16, 2022
Indeed. Another example of the baleful effects of expert groupthink, where there is little public debate or political scrutiny and where dissenters are traduced and cancelled. We saw the same with lockdown of course, and we see it also with net zero policies. Committees of appointed âexpertsâ determine policy, there is little or no public debate. There was / is no proper political scrutiny. Dissent is rubbished, dissenters are insulted and cancelled from public platforms. Then after a while the policy and the expertsâ pronouncements turn out to be wrong, and huge damage has been done.
May 16, 2022
In a nut shell, Richard 1. Sadly.
May 16, 2022
Importing 200 different nations into one land is another example of wisdom and experience being crushed in favour of mad experimentation by those in charge.
May 16, 2022
How comes people from the last eight states are not there? Have they not been invited?
Is one citizen from any of your â200 different nationsâ enough to qualify in your tally?
May 16, 2022
No problem. “Lessons will be learnt”. And away we go again.
May 16, 2022
The MPC needs to be overhauled, it’s to easily manipulated. What I mean by this is that the government can easily choose hawks or doves to suit their needs,hawks higher interest rates ,doves lower rates.
MPC members should not voice their opinions whilst on the committee or only voice the BOE words. By voicing their opinions it seems to me that they can rig the market, too many MPC members worry about the their own careers when on the MPC and many have voiced their true thoughts only when their term is up.
Voting should be anomonous. Like I’ve said before low interest rates and QE don’t work and they’ve been in use since 2008/9 if they did work we wouldn’t be in the mess we are now.
The BOE needs to increase the next rate rise by 1% otherwise it’s just a slow death to fixing the problem.
May 16, 2022
Given the Governorâs back story, he would seem a poor choice and rewarded for failure. What is it about the Public Sectors revolving door? Jeremy Hunt talks about poor managers in the NHS being redeployed only to make the same mistakes again.
And with Borisâs spendthrift nature plus those âon the booksâ relying on him for a job so no checks and balances it is no surprise your government has got us in the sh*t.
May 16, 2022
I prefer to take no notice of anything Jeremy Hunt has to say about anything.
This man was Sec of State for Health for 6 years. Under his watch, the Operation Cygnus exercise was held which, in 2016, identified that the NHS was badly prepared to deal with a pandemic. The only action he took was to bury the Report.
Having left the country highly vulnerable to a pandemic, he thinks he is qualified to become Prime Minister: as clear a potential case of failure and revolving doors which is possible to envisage but one he clearly doesn’t recognise.
May 16, 2022
1.2 million less people in the labour force post Covid, many older workers taking the opportunity to retire. Labour market tight, wages go up, prices go up, feeds into inflation.
May 17, 2022
Funny how its always wages that lead to inflation, never the greed of the big firms jumping on the bandwagon and putting up prices when they don’t need to.
May 16, 2022
Authority needs control to prevent excesses.
The BoE acts separately to prevent Govt from extremes. It is similar in rail where authority controlling safety is separate from profit motives of rail operators who might otherwise cut safety expenses for gain.
Govt and BoE should perform responsibly in harmonious balance. If either one is incompetent: dangerous crashes are likely.
Yet when both are incompetent disaster occurs.
May 16, 2022
Off topic, I have just sent a brief rebuttal of today’s editorial in the Irish News, as follows:
“You write today “The protocol remains open to amendment”, but the EU has repeatedly said that this is not the case and it will only discuss the implementation of the existing text.
This is not too surprising, as it brings back memories of the EU’s obstinate refusal to reopen the Lisbon Treaty after it had been rejected by Irish voters in the June 2008 referendum.
It was, of course, that treaty which introduced the Article 50 mechanism for the withdrawal of a member state, the provision that the UK chose to use after the 2016 referendum.”
In a note I pointed out that Pat Cox, then the President of the EU Parliament and actively campaigning for the treaty to be accepted, had welcomed that new provision:
âThe Lisbon Treaty includes â for the first time â a divorce clause for a member-state to negotiate an orderly withdrawal from the EU, the ultimate, if extreme, guarantee of sovereignty.â
May 16, 2022
Cause & Effect
SirJ has rightly described the effect of the various BoE initiatives, which have added to some of the inflationary pressures
Brexit, covid and Russo/Ukraine war is smoke & mirrors
The cause of our current inflationary and cost of living woes started prior to 2019 general election but was massively accelerated by Boris green revolution and net-zeroâŠ.importing energy and cutting fossil fuel and a policy of net-zero is a direct cause of our economic problems â a policy which continues today under this party doctrine
May 16, 2022
At the time it was denied that Quantitive Easing was “printing money”. Apparently it was entirely different and not inflationary or in any way risky…lol…
May 16, 2022
While I agree that the B of E got it wrong in printing so much money for too long, surely that has been a minor contributiont to inflation compared with the recent spiralling cost of energy which has rapidly increased prices across the board ?
That may be a temporary problem as, even if energy costs remain at these levels, the inflationary effect will drop out of the figures in 6-9 months.
The bank increasing interest rates will do nothing much to control inflation, all it will do is put even more strain on households with mortgages and businesses with loans to service.
The situation in the USA is completely different : their very high rate of inflation has been caused by Biden’s huge increase in spending and his household give-aways. Just like every previous Labour government except Blair’s has done here .
May 16, 2022
Time overdue for the Bank to re-adopt its obsession with M3 changes or rather now its modern replacement Money Zero Maturity?
May 16, 2022
âChina and Switzerland show that even with sky high energy and dear food it was possible to keep inflation down.â
China of course is not a democracy so I suppose they can control the price of food and they are increasing their burning of cheap coal for electricity and the importation of cheaper hydrocarbon fuels from Russia.
Switzerlandâs electricity is 57% hydro and 37% nuclear, neither of which are affected by the price of gas and oil so at least their electricity prices should not be rising like ours.
The UKâs energy on the other hand is controlled by the fifth column communists in the Civil Service (BEIS), together with their militant wings Greenpeace/XR/IB/JSO/Rent-a-Mob who are intent on destroying our economy through their Net Zero Strategy which requires :
– Closing down all our nuclear plants with a plan to build just one, single new nuclear plant, financed by China, at a cost of double what it should have been. Nothing else is planned for the electricity supply decarbonising date of 2035.
– Closing down our North Sea oil and gas and preventing fracking to restrict gas supplies and thus to make gas expensive as clearly outlined in their Strategy.
Switzerland is far better governed, makes far better decisions for its people, as a result of their regular referendums.
May 16, 2022
Switzerland has a multilingual, outward-looking, civic-minded electorate.
It also has free movement with the European Union.
May 17, 2022
And no dinghies.
May 17, 2022
NLH with a clause that you have to have enough money to support yourself whilst in Switzerland and you have to pay for health insurance. I wonder how Switzerland gets away with no giving housing benefits, pay for the children of EU citizens that remain in their own countries etc.
Any EU/EFTA citizen who wishes to stay in Switzerland for more than 90 days/three months must register with the Residentsâ Registry Office in their Swiss canton. You must apply for a residence permit within 14 days of arrival in Switzerland. If you will be working, the residence permit doubles as a work permit. If you come to Switzerland as a student, with independent means, to retire, or to be with your family, you must apply for a residence permit for non-working purposes.
You have to show that you have enough money to support yourself while youâre in Switzerland. In addition, you must have appropriate health and accident insurance. By law, you must take out health insurance with a Swiss health insurance company.
May 17, 2022
+1
May 16, 2022
I blame nobody other than politicians for the mess this country is in.
1. The poor Brexit deal was down to Remainers in Parliament undermining our negotiations and trying to overturn a democratic vote.
2. High immigration and the failure to return illegal migrants are down to bleeding heart liberal politicians. We should leave the ECHR like Theresa May once promised and vastly increase the minimum wage required for importing foreign workers.
3. High inflation is down to poor money management by the Government. Boris gives our money away to foreigners and taxes us to death to pay for his grandstanding. What happened to reducing Foreign Aid? The people never asked for it to be increased this was a stitch-up by the Liberal coalition government.
4. Massive fraud, from furlough and eat out to help out, that is being brushed under the carpet because itâs so embarrassing.
5. The Benefit System needs tightening up. We still have billions in fraud because the bleeding hearts insisted on paying benefits upfront before any checks are carried out. We have benefit fraudsters exploiting this loophole that politicians caused and we are paying for it.
6. People working from home needs to stop. Everyone I know doing this is abusing it. Productivity will be impacted if it continues. JRM is right to highlight the issue.
7. The cost of net-zero needs to be debated and stopped before it bankrupts us. We need food and energy security.
8. The NHS needs reforming with an emphasis on health care rather than woke, diversity nonsense.
9. The police service needs reforming with an emphasis on solving crime rather than woke, diversity nonsense.
10. And, finally I blame voters for continuing to elect the woeful politicians that currently make up our parliament.
I could go on but my post would be too long. A good start would be to replace Rishi Sunak with Sir John Redwood.
May 17, 2022
Christine
+1 And a good list.
May 17, 2022
All good points as I and many others have been saying for a long time.BUT saying isn’t going to change anything!
May 18, 2022
Hence point 10.
May 16, 2022
I see that a video has surfaced of Jeremy Hunt praising the measures adopted by the Chinese communist party and their response to the virus by welding their population, including his sister into their houses!
Hopefully that will knock any leadership ambitions on the head?
May 16, 2022
Rightly or wrongly Jeremy Hunt is…..only out for Jeremy Hunt
May 16, 2022
So where did all that spending go? How much was lost to fraud and why do the authorities have no interest in dealing with that fraud?
May 16, 2022
We are told today Ofgem will review (raise) the price cap every 3 months.
The good folk of this Isle will similarly need salaries, pensions and benefits reviewed more regularly, now we have this massive inflation….
I agree with your sage comments about BoE, but the inflation problem is also worldwide and driven mainly by the hike in oil prices and now food… wheat, oils etc.
The UK’s pathetic FX level is majorly impacted by the BoE loose policies, thus importing more inflation, the doom loop article in today’s D Telegraph.
What HMG can & do need to do is MANAGE our cost base in parallel and stop the vanity projects, chase the Fraud! 90+K civil servants destined to go is a good start, keep pushing to at least double that, repeal EU laws, reducing this cost of oversight, deploy more automation. Ditto in Local Govt, NHS and the huge ballooning cost of indexed linked pensions needs addressing as the elephant in the room for the sake of the next generation. Year in, year out, these massive out of control pension overheads are a growing deadweight on our ability to balance the books.
Our own natural gas has 1/3 the carbon footprint of LNG (your article passim) at very reasonable cost/prices so why isn’t HMG pursuing this with absolute massive vigour! Why are we landing foreign LNG and then pumping it to europe when the EU are threatening us with trade sanctions? Then I hear we’re turning LNG tankers away too, nutty.
We have a promised warm summer which buys HMG a few months to sort out the energy debacle and UK financial control, time is of the essence. I am old enough to recall the runs on the pound and can see it again now – it will equally make us vulnerable to an IMF bailout… where we would indeed be forced to make the necessary step-change corrections required, far more painfully and embarrassingly…
Get on with it Boris et al.
May 16, 2022
40 years of taking instructions from Brussels and we end up with those in control unable to think.
The Andew Baileyâs will be gone in 20 years so stop fretting.We will get the right people in the right jobs.
May 17, 2022
Bob
All true. But BREXIT is a work in progress with no end date.
May 16, 2022
And repeal IR35!!
May 16, 2022
+1 also repeal the Climate Change Act, the EU withdrawal agreement, the Trade & Cooperation Agreement and the Northern Ireland ProtocolâŠ.and revisit every international treaty
May 16, 2022
Have a look at the following chart https://fredblog.stlouisfed.org/2014/08/m2-velocity-and-inflation/?utm_source=series_page&utm_medium=related_content&utm_term=related_resources&utm_campaign=fredblog . The velocity of circulation (VoC) is very low, even with all this misnamed “money printing”. But, CPI inflation is at 8%. Households are not spending all that printed money, they are hoarding it. So how come the CPI is going up? (Make sure the X axis zoom control is to the right end.)
See where M1V and M2V dropped off a cliff when everyone stopped spending and started hoarding what income they had. https://fred.stlouisfed.org/graph/?id=M2V,M1V,
Next, have a read of https://research.stlouisfed.org/publications/economic-synopses/2022/05/12/supply-chain-disruptions-and-inflation-during-covid-19 Was printing money the cause of current inflation? If you want to learn about modern econometrics, there is no point asking the BoE; the Treasury or anyone in Westminster/Whitehall VoC isn’t even a metric in the UK. UK M1V and M2V are currently 0.92 and 0.74; even lower than the US.
May 16, 2022
Still trying to prove that endlessly creating magic money doesn’t create inflation, I see acorn.
May 17, 2022
acorn
There is nothing wrong with people wanting to save for a rainy day, a sunny holiday or Christmas or whatever.
May 17, 2022
Acorn, they are hoarding it because our news channels tell us EVERY DAY we are going to need it just to pay our energy bills, just to pay our fuel bills. They tell us not to be sure what is coming next. Experts in the BoE talk about âapocalypseâ – what sort of language is this for an economist who would do better if people stopped hoarding.
We have politicians in our House of Parliament, supposed to be representing the UNITED KINGDOM who revel in working against the public.
May 16, 2022
I am happy to leave criticism of BoE policy to you and anyone else equally qualified. I do agree however that if you make shed loads of money available to people so that they can chase finite or reducing stocks of goods the result is inflation. It is those without a key to the shed who suffer.
One big problem that persists is at our holiday oriented airports, seemingly through lack of staff. One aspect of it is that it could be eased if selective security were sdopted in place of blanket security. The political whingers would complain as they do with stop and search, but then ask, who are the likely security problem.
Why not make use of the military police, temporarily until Covid stricken airport workers return to their duties. The military can organise most events free of the baggage we have allowed to encumber most other workers.
May 16, 2022
Management would appear to be sadly lacking over the decades. Will it ever change?
May 17, 2022
It is a result of outsourcing their responsibilities.
May 16, 2022
The incompetence of the BoE, and treasury!
The first and most tragic mistake of this Government was to abandon the sensible, pandemic plan based on tried and tested experience and science for a hair brained scheme and gene therapy that never completed trials.
The money printing and economic incontinence and waste followed. Test and trace, furlough, eat out to help out plus other incompetences. Plainly a government that had no clue, so just continued printing more money.
May 16, 2022
Off topic, I’ve sent this letter to daily newspapers in the hope that all will read it and some may publish it:
“Nobody has ever questioned the right and duty of the EU to protect the integrity of its Single Market from unacceptable goods being brought into the Irish Republic across the land border with Northern Ireland. But how much would it matter for that stated purpose whether an unacceptable item was intercepted at Belfast docks, or at the land border itself, or at any point in between?
In principle it matters not at all; in practice it is universally agreed that it would be prudent to keep all checks and controls away from the actual border, while the last option has the distinct advantage that it not only makes it possible to focus just on the imported goods destined for export to the Republic but also covers goods produced in the province for export, which obviously will not be picked up at any point of entry.
Why then is the EU so insistent that its checks and controls must be misdirected to all the goods imported into Northern Ireland, most of which stay in the province and so need not concern the EU, when it should concentrate just on the goods which are being exported to the Republic?”
We are now well into the fifth year of the EU and the Irish government being allowed to make a mountain out of a molehill on the Irish border, when Theresa May should have kicked it over in December 2017 but chose not to do so because it served as a useful pretext for keeping us under the thumb of the EU.
From April 9 2018:
http://johnredwoodsdiary.com/2018/04/09/how-green-is-bus-travel/#comment-929471
“Meanwhile, UK and EU officials, sometimes known as âsherpasâ as I recall, meet again today to try to work out a new plan for the ascent of the massive mountain that the EU has insisted on unnecessarily creating from the molehill of the land border between Northern Ireland and the Irish Republic … “
May 16, 2022
So why has the UK not allowed the EU to have live data of goods entering Northern Ireland from GB, as per the Protocol? Do you accept that the DUP is dedicated to installing a comprehensive, physical border between Northern Ireland and the Republic?
May 16, 2022
According to the Telegraph on May 5:
https://www.telegraph.co.uk/politics/2022/05/05/brussels-refusing-access-data-could-solve-northern-ireland-protocol/
“EU officials will not log on to a new IT system that monitors cross-border trade which has been live since January, igniting a fresh row over … ”
Some DUP members may want a hard border but they are clearly not going to get it and their desire for it is totally irrelevant to the present problem.
May 16, 2022
This government will be enshrined in history as the one that just ignored the cries of its people. Today it is being reported that Liz Truss is raising foreign aid back to 0.7% which was the level it was at pre pandemic. Words fail me.
Is it incompetence, ignorance regarding the welfare of your fellow countrymen and women?
May 16, 2022
Well reported TT.
Boris will be behind this. It’s all about international glory for him.
May 16, 2022
We give money to rich dictators while the people of the UK go to food banksâŠ.apart from the propaganda on the UN website I see no evidence that our foreign aid has ever developed a country out of povertyâŠ..it keeps them in poverty
May 16, 2022
ââGreenpeace celebrated a solar project in 2014, claiming that it made Dharnai the first village in India to run entirely on solar energy. The project quickly collapsed, though, as batteries became overused, causing the entire grid to fall into disrepair
Today, the project building is now being used to shelter cattle and the solar panels are covered in dust and rods supporting the green tech are heavily-rusted.ââ
https://dailycaller.com/2022/05/15/greenpeace-solar-farm-india-cattle-shed-renewable-energy/?fbclid=IwAR0SH-ZOUh43FI8Gl1G3UgDpLQRrNifGhO5GxYCoEySVaKJkweJ1brIuW_c
You donations and taxpayer funded support wastedâŠ.again
May 16, 2022
In Sri Lanka, Organic Farming Went Catastrophically Wrong
https://foreignpolicy.com/2022/03/05/sri-lanka-organic-farming-crisis/?fbclid=IwAR01Bj0yhgFzRxIhS05O5B8_1rR82XBj-NvCjfUnpAEx0-aCYKH3QYl_2dc
Social engineeringâŠ.itâs the same with our ânet-zeroâ
May 17, 2022
We have been digging wells and giving money to asset / mineral rich Africa since they got independence and they still want more. As so many want to come here to live, why don’t we all swap places. We go live there and they can live here. Let them find the money for all the pot holes.
May 16, 2022
Could someone explain to this simple soul why the Bank of England printing money to buy up government debt in the secondary market causes the price of food to rise.
Reply One way is printing too many pounds drive down the value of the pound against the dollar making imported food dearer.
May 16, 2022
Right to reply
Or it could be the insane economic ideas and policies of net-zero driving up the costs of oil & gas which is passed onto consumer products
May 16, 2022
Reply to reply. Didnât the yanks print even more? And I canât think of any food I eat from the States.
May 17, 2022
Speculation and asset re-balancing into land food etc. Some notable billionaires were ahead of the curve.
Note sanctions on Russian goods supply dont actually reduce supply. It just means the buyers change , some get discounts and others pay more to buy off a different non-russian seller. The value of Russian exports go up as the Russian Rouble.
Performance related pay should be put in place. BOE pensions should not be guaranteed and should be invested in a basket of UK financial assets which are based on those asset classes of the average taxpayer. Its only fair they have little skin in the game.
Seems an expensive overhead for quite poor outcomes.
May 16, 2022
Iâve just heard a Tory mp suggesting that if we canât cope we should get a better job!
What about those of us who have retired?
Typical insensitive comment, I canât remember how long sheâs claimed in expenses, but an eye watering amount
May 16, 2022
This Tory government and its MPs have indeed lost the plot
May 16, 2022
Appearing in front of MPs this afternoon, the Governor of the Bank of England, Andrew Bailey, admitted heâd felt helpless to control soaring prices amid an energy market shock and the war in Ukraine, adding: âIt’s a very, very difficult place for us to be in.â
He needs sacking, put someone in charge with some LEADERSHIP and REAL IDEAS!! He’s welcome to crib from Sir J’s input and more on this site. It really isn’t that complicated, all been done before…. of course it appears difficult, which is why we pay top dollar for such experts. Give me strength!
May 16, 2022
“The EU set out to wreck GB to Northern Ireland trade. The U.K. government should legislate to fix it. The EU has spent two years refusing to help.”
May the Unionists of all parties hang together over this if they are to resist the fudge cooking on the Mainland.
May 16, 2022
Inflation is up, interest rates up, NIP cock up, cost of living up, petrol & diesel up, energy bills up the BoE talking about apocalyptic food pricesâŠ..meanwhile 436 illegal immigrants arrived on small boats yesterday â under the watch of the Tory partyâŠ. SirJ you need to get a grip
May 17, 2022
Don’t worry, glen they won’t have to pay for any of that.
/sarc
May 17, 2022
MP’s recent pay rise has already insulated them from most of it. ÂŁ40 quid a week increase on already high salary for essentially a part time job, whilst we cannot of course increase pensions by more than a fiver.
May 17, 2022
Of course if we were largely self-sufficient then there would less of an impact of a devaluing GBP and also mitigate said devaluation.
So address the UK supply issues caused by policy and execution failure to enable the delivery of the required capacity. Increase interest rates slowly , reduce personal taxes and help manage debt levels down via tax policy incentives.
Focus the thin air money banks on commerce and the mutuals to property but with better regulation to prevent 2008.
Where is a National Saving Bonds i can invest in windpower. Its so profitable they dont want to take up HMG subsidies any more!
Dont be afraid to nationalize some of the so called markets. They will at least be UK nationalized industries and could be focussed on UK needs.
May 18, 2022
People do some research and ask yourself who owns and controls the banking system. Then you will know why you are paying tax. However nothing can stop what is coming, nothing.