Yesterday’s dramatic Bank of England 1.5% rate cut was an extraordinary admission of analytical failure. The Monetary Policy Committee of orthodox economists (with Danny Blanchflower the honourable exception) is well behind the curve. While it is tiresome to beat one’s own drum, I am obliged to point out that on the 12th July I wrote a short piece for the Guardian beseeching the Bank of England not to “sacrifice the economy on the cross of inflation targeting”. Today’s numbers from the Insolvency Service reveal that more than 4,000 companies have been sacrificed. Company insolvencies have risen by 26.3% over a year ago, and by 10% over the last quarter. This represents the loss of a great deal of productive activity, and of thousands of jobs.
Archive for the ‘British banking’ Category
The BoE has lost control
Blinded by Dogma… in the UK Guardian
9th October, 2008. Central banks’ obsession with inflation is stopping them from tackling a far more pressing threat.
Rates: the BoE is not independent - it has a political mandate
Both the British Chancellor, Alastair Darling and the shadow Chancellor, George Osborne, have been on the radio this morning, resisting the idea that interest rates are political. Instead they have argued, vehemently, that the Bank of England is independent, and that the Bank must decide whether or not to lower interest rates.
Bring back Keynes… in the Guardian
Tuesday 30th September, 2008.
Anglo-American finance ministers and central bankers, like little Dutch boys, try desperately to plug leaks in the bursting dyke that is the international financial system. In the US, treasury secretary Hank Paulson hoped for $700bn to plug the gaping hole in Wall Street’s banks. In the UK, the government is not just plugging holes, but setting aside competition rules to encourage the monopolisation of finance.
Bring back cool reasonable voice of Keynes… in the FT
Tuesday 30th September, 2008.
Sir, Your editorial “In praise of free markets” (September 27/28) conflates regulation of trade markets with that of financial markets.
This is a flawed analysis, one at the core of most economic orthodoxy – that money, like land, oil, soya beans, diamonds or gold, is a commodity, and therefore that trade and markets in money are no different from markets in, say, soya beans.
Why the bail-out would not work… on BBC News Online
Monday, 29 September, 2008.
Is Warren Buffett right? If this bail-out had been passed by congress, would it have halted the meltdown?
I don’t believe so. Here’s why…
Interest rates, Keynes and the longevity of the rentier
The Prime Minister, Gordon Brown, speaking on Radio 4’s flagship current affairs programme this morning, repeated something he says regularly: that ‘interest rates are low’ and that his government, through the Bank of England, kept them low. The question the BBC should have asked is this: if interest rates are low, and have been so, why on earth are people/companies/banks having such a hard time paying debts? Surely the Credit Crunch crunched, because debts - of banks in particular - became both too large, too expensive, and unpayable? Do small businessmen/women pay low rates on investments? Mortgages? Credit Cards? Car loans? Does the PM live/work on another planet?
The Bankers’ Recession and the £200 billion bail-out
A Mr. David Smith in a letter to the Financial Times, (29 Aug 08) has suggested we brand this global recession ‘the bankers’ recession’. He has my support and enthusiastic commitment to raising awareness of the brand. Especially after today’s UK news.
Ratcheting up the interest rate rack of torture.
In this big bad world of the Credit Crunch, powerful central bankers - civil servants all - have bent over backwards to help powerful and rich private bankers.
On one day, ‘debtonation day’, central bankers in Europe and the US pumped an eye-watering $150 billion into the financial system, to keep big banks afloat. According to Bloomberg, the US’s Federal reserve has ‘cycled $2.58 trillion through U.S. money markets since December’. (Bloomberg 8th August, 2008).
Fannie and Freddie impact will be global, systemic
Fulfilling my duties as a citizen, I am now confined to the Southwark Crown Court as a juror, so have little time to update the blog. However the effective insolvency of two US government sponsored banks or enterprises (GSEs) - Fannie Mae & Freddie Mac - will now impact not just all those US individuals, institutions and local governments that may have invested in these banks; not just on US taxpayers who are expected to bail them out; but also on you and I (our banks may well hold Fannie and Freddie securities); the central banks of the world that have bought their debt - confident that it will always be repaid.
Their insolvency now threatens a global systemic financial crisis, and their taxpayer-funded bailout of shareholders, bondholders and an incompetent management exposes the hypocrisy of much neo-liberal cant.
Ann Pettifor is a political economist and author of 'The Coming First World Debt Crisis' (Palgrave, 2006) and editor of 'The Real World Economic Outlook' (Palgrave, 2003). She is a fellow of the