The Bank of England committee charged with ensuring the stability of Britain's banks is split over George Osborne's plan to oblige it to support the government's new growth agenda.
The nub of the issue is a big one: Osborne said in his Mansion House speech last week that the BoE's Financial Policy Committee should no longer focus narrowly on safeguarding the banking sector and should have a secondary objective to support the economic policy of the government.
That effectively ends the era of an independent central bank: it says the Bank has a role in supporting the Treasury that sets the economic goals for the country.
And as the FT reports, some in banking don't like that. Unsurprisingly. They want to keep control of the game.
On this one I support Osborne: independent central banks were always a bad idea that threatened democratic control of the economy. Osborne's move is timid, but it's a step in the right direction.
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Where would Osborne get an idea like this from? It’s so far off the reservation I suspect he’s come up with this on his own and it’s slipped past his minders.
You might want to remember who gave the Bank of England operational independence. Overturning decisions of Brown & Blair would be a joy to Mr Osborne, I think.
And me too on occasion
Labour has had the courage it’s ‘New’ iteration got things wrong
Methinks some fiscal stimulus masquerading as Plan A. See Krugman blog June 15, 2012 ‘Crony Keynesianism’ with Portes link for details.
Let me quote a little from the response I got from the BBC May 2012 (from their ‘Editor of our Business and Economics unit’:
“In terms of combatting the liquidity trap, we have also reported the Bank of England’s estimate of how quantitative easing had affected economic output or GDP on October 6 2011. The wider point, of course, is that the Bank of England and Fed in the US would not agree we are in such a trap, even if there are some economists who do.”
As Keynes said, ‘madmen in authority’. I’ll try OFCOM next – you never know your luck, aye.
Osborne is in effect saying that the only way of bringing stimulus involves accepting riskier banks. That is the most absurd B.S. I have heard in a long time. Straightforward fiscal stimulus would raise demand, increase businesses’ turnovers and make those loans that banks have made to businesses MORE SECURE, not less secure.
Osborne now says he wants to give money to the private sector banks but only on condition they lend it out !
George, we (the British people) actually had 2 banks. Why didn’t you channel the money through them & then none of these silly conditions would’ve been necessary ?
The answer is either that George believes, as an article of absolute faith, that everything in the public sector is so inefficient, corrupt & hopeless that it should never be allowed to taint any important transaction OR he wanted to allow every bank in on the ground floor because he’s sure they’ll all make a killing on this one (subsidised by the poor old taxpayer).
Either way, I think we should be told !