Whilst on a train home last night, after an evening discussing macroeconomic policy, it occurred to me that the Bank of England now has as much chance of controlling the economy by changing interest rates as a birth control clinic has of controlling a country's population when everyone in it is aged over 50.
Despite that many still think that we must have an independent Bank of England controlling the economy using interest rates with the sole aim of limiting inflation, which has not been an issue of any economic significance for a considerable period.
Why, oh why, you might well ask?
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It sounds you like you want an organ that has centralised control of the economy, which has quite a good record in countries that have had them.
I think the role of the BoE should be to ensure some sort of financial stability, with the government giving us the freedom to have whatever economy we would like.
I want democratic control of the economy
It’s really not such an unusual thing to wish for
John Legere says:
“It sounds you like you want an organ that has centralised control of the economy, ”
Yes what would you call it….? A ‘government’ perhaps.
“I think the role of the BoE should be to ensure some sort of financial stability, with the government giving us the freedom to have whatever economy we would like.”
To pretend that the economy can be run in a neutral, independent manner without political ‘interference’ or control is strictly for the birds.
What Gordon Brown did in declaring the BofE ‘Independent’ was no more than a piece of PR manoeuvring to deflect criticism from the incoming government by pretending this spurious neutrality of the money supply.
Well just look at the homepage of the BofE website . It says ‘ Promoting the good of the people of the United Kingdom by maintaining monetary and financial stability ‘ . I cannot find what the Bank defines as ‘ good ‘ , but the illusion of control over the price of money is essential whether the Bank is independent or not . The so-called independence was a fast one pulled by Gordon Brown to give himself cover, if things went pear shaped like they did for Norman Lamont in 1992, which was typical of the man. And of course a lot of careers depend on it .
i think the independence aspect is a side issue the main issue is it is to maintain the illusion of control over the price of money and by extension the economy as a whole as the boy e website says and a lot of careers depend on it
John Hope says:
“… main issue is it is to maintain the illusion of control over the price of money and by extension the economy as a whole ….”
I think therein lies the nub of the problem.
The main issue is to have control….not merely to maintain the ‘illusion’. Also I suspect it is arsey-versey to believe that money is what controls the economy.
Money is not the economy. It’s just a metric device.
The confusion is fundamental; there is parallel misprision in education. The conceit is that if you can get scholars to pass exams they are ipso facto ‘educated’. Unfortunately it is also untrue.
That was Milton Friedman’s pitch, and look where it has taken us. To the brink I would say, or not far off it.
Andy. I think what I was trying to say is that an ‘ economy ‘ isn’t an abstraction , it’s people going about their daily lives with all that that implies and the idea that any macroeconomic policy can closely control all these millions of interactions is absurd, but what it can do is indicate the direction of travel i.e. towards the many or towards the few and as most of us who comment on this blog agree the direction of travel at present is towards the few. And I don’t say this because I am deprived, or poor , but because I don’t want to live as a fantasist.
I think one people many who comment here regularly have no desire to be is fantasists
John Hope says:
“Andy. I think what I was trying to say is that an ‘ economy ‘ isn’t an abstraction ”
Yes, John. I’m not really arguing with you so much as picking on a particular phrase you used which seemed to me to illustrate (in my opinion) a commonly held view and which I felt was undermining what you were saying.
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