Tepid Bank of England hamstrung by past leadership and groupthink

Does anyone remember Mark Carney. back in the days when we thought only hiring foreign experts would do, we had this Canadian lead the Bank of England.

In his whole tenure he promised much but did less. There were few changes in interest rates and post the 2008 recession we actually dropped rates throughout the recovery by 0.25%.

And we poured in yet more Quantitative Easing to create the easy money. This has come back to bite us quite nastily now. 

And yet today's Bank of England has chosen to raise interest rates by 0.25%. Whereas the Federal Reserve went for 0.75% - inflation is worse in the UK too. 

Whilst the £ has recovered a little today on the back of the rise, it is at a very low $1.23, exacerbating our energy crisis through the exchange rate fiasco. 

Moreover, the Bank is frit from cancelling QE  and reducing money supply. thereby baking in a long road to reduce inflation. in the 1980's we would be talking about Interest rates at 12% -15% by now. 

But so sleepy is the Bank and so slothful in its actions that we will be lucky to have 2% interest rates in 2022 whilst experiencing 10%+ inflation. 

Frankly, it is unbelievable. Mind-numbing. A wilful destruction of the Pound and people's real net worth and assets to bail-out the Government of its debt and to the hope that something will turn up. 

All the Bank of England Monetary Policy members should be sacked forthwith due to showing an insufficient understanding of their remit which is to manage economic stability! Not promote instability. 

Will the BOE cut rates?

Logic would suggest, that faced with a collapse in the credit markets and also in the money markets the right decision to be made would be to cut interest rates. Maybe not by 1% at once, but certainly by a 0.5% by the year end.

Yet in Mervyn King's letter to Alistair Darling today, it appears that the Bank of England has become more hawkish about inflation. Hedging its bet by saying that inflation will soon peak at 5%, but also noting how high above target this is.

There seems to be a determination to keep inflation down, even as we enter a recession. Good news for savers, less good for borrowers. A high risk move, but I do trust the BOE members intelligence and integrity; let's hope they are lucky too.

If Brown is crazy can a King help?

Gordon's weak policies are doing nothing to help the UK. Perhaps that is too much, as least he realises the credit card is now full and there is to be no more reckless spending.

However the damage is done. In so many areas the Uk is in a parlous economic position. Let's review a few of the things mentioned by a real economic brain, Mervyn King, yesterday:

- The Government want to extend the special liquidity scheme, which Mervyn King wants to stop and replace with something more sensible. Banks have now borrowed about £170 billion (per my good info). Free money is a nice one for them, but is not really the answer long-term.

- He warns the Government off the idea of nationalised mortgages (too late, Northern Rock!).

- Spending his way out of recession is only going to sink our markets, thereby increasing bond prices and further increasing national debt (our children's future deprived, remember). Yet Labour will have to do this to buy back some client votes.

- Asset backed securities will not come back during a falling housing market. Thus banking models need to change. Will Labour let a big bank go to the wall, err..see Northern Wreck.


Sane ideas all of them, hopefully the Government will listen, doubtful though. However, lets hope King can persuade his committee to vote for lower interest rates in the near future. 2009 looks dark enough as it is.