Ride the Bull!

The Bank of England has today decided after all to pump money into the markets.

This is in direct opposition to what it had said and done since the middle of August.

As ND has described so well below, the Bank had supposedly been strong enough to let the markets sort out their own mess.

Northern Rock changed that and it is clear that there has been extreme pressure on the Bank to change course and copy the US and Eurozone in major support for the banks.

Not only in the UK, but the Federal Reserve in the US has followed effectively the same line. A 0.5% cut in US interest rates has been agreed. This will no doubt help to end the credit crunch before Christmas and avoid a recession.

The problem though is that all we are doing is putting off the inevitable recession. Too much money has been lent recklessly and this has to be put right. Merely allowing conditions to continue to encourage this behaviour makes no economic sense.

It makes political sense though, saving the Republicans in the US and stopping Gordon Brown from becoming a lame duck Prime Minister in record quick time.

So what do do? Well with this level of government intervention (currently all those highly paid bankers in London are effectively now state employees working in the public sector!) the only ting to do is ride the Bull. Bank shares will go up and so will the stock market in the short -term. Sure it will all end, increasingly like likely to be in 2009 to 2011 as James Higham has often predicted.

Until then make hay while the sun shines; the night will be much longer then.