The Guardian's financial headline today is:
Bond yields surge and shares slump as investors spooked by worries that central banks will soon start to put the brakes on the economy
They may well be right. Mark Carney has already implied he'll tolerate 7% unemployment - well over 2.2. million people.
Why will he do that? To make sure that the financial markets have what they want.
And that's why we need economic policy run by Chancellors who are democratically accountable rather than central bankers who are not.
I often think the independence of the Bank of England was the biggest mistake Labour made.
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‘I often think the independence of the Bank of England was the biggest mistake Labour made.’
It was certainly one of them, Richard. But it’s worth noting that it was simply one example of something that has been ongoing since the early 1990s – politicians’ attempts to escape what used to be called ‘ministerial responsibility’.
As you may remember, even through the Thatcher years there were examples of ministers having to resign because of operational failures in their particular policy domains (as opposed to actual or alleged wrongdoing, as with Mandelson in the Blair governments, for example). This also reflected badly on senior civil servants so they were not particulary keen on the principle of ministerial responsibility either.
The upshot was that succesive governments sought ways to water down or rid themselves of this long standing convention and the model of government that underpinned it. The wizard solution was to try wherever possible to seperate policy making from operations (nowadays referred to as “delivery”). Thus ministers and civil servants would focus on policy making and then “others” would carry out the implementation. The theory was that such as distinction would effectively distance ministers and their mandarins from blame should cock ups and failures with the operationalisation of policy occur.
One of the early examples of this approach in action – and one that became endemic across government – came to be known as “agencification”: the creation of so called arms length agencies that dealt with the delivery (operation) of policy. If my memory serves me correctly the prison service was an early example of an agency, as was DVLA, passports, and so on. Agencies had their own management structures, supposedly free to make their own decisions about how to deliver particular policies without interference from ministers.
Of course, things have moved on a great deal over the years. Privatisation and outsourcing have largely replaced agencies – or will do by 2015. But the same outcome is acheived, in most cases even more effectively. One example serves to illustrate this more than any other: the DWP, Atos and the disability (work) assessment programme. Here the former are able to bat away any issues raised about the operation of the policy (because delivery is Atos’s business), while the latter bat away any issues about failings, unfairness, and so on, because Atos are able to claim they are the result of the policy and therefore the responsibility of the DWP. This level of deniability creates an environment in which neither organisation ever has to take action to rectify the real issues with the work assessment programme, and the various ministers floats free from it all.
Injecting such a distinction into health policy (i.e. the NHS) has been a goal of successive governments and the DoH and is at the core of current government’s approach to the NHS. But recent events within the NHS illustrate the fallacy of the distinction between almost every example of policy and practice: they are inherently political and thus ministers and governments can ultimately never escape that reality. Nevertheless, the fallacy has to be maintained, and the “independence” of the BoE is just one such example.
All part of the Cowardly State, I suggest
Agree entirely, Richard. The possession and use of power without responsibility. A benchmark of the cowardly state, and fundamental feature of the 1%, the feral rich and politicians and political parties whose primary purpose is to serve their interests.
Would that be labour, or new-labour.
I only ask because it often, if not always, seems that the difference between new-labour and Cameron-conservative is more that of letters. the name of the party is different, but the politics are similar.
All our ‘politicians’ are now educated at the same establishments to the same standard. The majority of them came into politics rich, and go out considerably richer.
As such, they represent the 1% to a higher degree than the 99%.
It’s no wonder that fewer are voting in elections now. Not much of substance to vote for.
I totally agree! Not only was there no democratic discussion, prior to Brown making the BoE independent, but Mervyn King’s subsequent backing of Osborne’s austerity package (and the lies about the UK being in danger of being the next Greece) was hardly neutral.
Implicit in making the Bank of England independent, is that democratically elected politicians are not be trusted because democracy interferes with the ‘wisdom of the market’ .. which is another word for implementing corporate fascism.
One could argue that it’s the banks who run government, and that what’s needed isn’t an independent central bank, it’s an independent government. For example, what would a political party do without a bank account? How would it function? The real dependency goes entirely in the wrong direction here. Perhaps we need a political party funded by bitcoin. They’d still have to trade with the non-bitcoin world though… very tricky, this. Perhaps an entirely independent banking network needs to be created which everyone could freely join – but how to do that via a political system which, as I suggest, is dependent upon the existing banking network? We really do need an alternative to central government, a wholly new form of authority, one not in thrall to the banksters.
I’ve been reading about the origins of the BofE. It seems it was set up by a group of traders (apparently in league with certain leading politicians of the day) to do one thing and one thing only, take gold away from the population and give them in return potentially worthless bits of paper. It worked very well and we still use these bits of paper today, they’re called bank notes. The whole thing was a scam, the banksters got gold which would always retain its value and the marks, the punters, we got IOUs which could and pretty soon did depreciate in value as more and more of them were creted and distributed to meet the interest payments.
The point I wish to make here is that the reason to call the BofE into existence was to seperate the broader population from their wealth and nothing else. Banking’s a scam, always has been. I feel myself that banking itself has to go. Talk of breaking up the banks and seperating investment and retail banks doesn’t go anywhere near enough. Credit creation itself, hugely necessary, needs to be stripped from the present banking system and handed over to responsibe individuals who will fully comprehend the gravity of their positions and how mistakes on their part would lead to the devaluation of the currency. They’d be a bit like the old-style bank managers but instead of prudent lending (as we thought of it back then) these new officals would know they were creating new money and that it had to be done prudently not for fear of insolvency but of devaluing the currency itself.
@ Bill Kruse
You say “I’ve been reading about the origins of the BofE. It seems it was set up by a group of traders (apparently in league with certain leading politicians of the day) to do one thing and one thing only, take gold away from the population and give them in return potentially worthless bits of paper. It worked very well and we still use these bits of paper today, they’re called bank notes.”
Undoubtedly one of the best books on this whole matter is Stephen Zarlenga’s “The Lost Science of Money” (Published by the American Monetary Institute – an organization set up by Zarlenga, accessible at http://www.monetary.org) – a boook I’ve read twice, and still need to re-read to absorb it fully. Basically, however, the BofE was actually a Dutch take-over/coup d’etat by the incoming Dutch King, William lll, very much along the lines you describe.
The crucial point, however, is that ever since the REAL nature of money (which was VERY clear before the BofE’s creation, being basically a matter of possession of specie, in the form of coin and metals) has been sedulously concealed from the public, not just here, but everywhere, such that I can read a letter in today’s Church Times telling us that “banks do not create that money or debt. Only central banks, which are an arm of government, have the power to create money” – a statement as near to idiocy as it is possible to be, without being certified.
Does that writer REALLY imagine that when I create a debt by using a credit or debit card, that the card providers trot off to the BofE, and ask for increased money to be created to meet the “money” they have lent? If so, he is truly living in Alice’s Wonderland, for, of course, all that happens is that an entry on the electronic ledger is made, recording that I OWE £x – an entry that crystallizes into a proprietary right, for the honouring of which I can be sued – BUT NO ACTUAL “MONEY” IS ISSUED BY ANYONE. And this “right” is tradeable, only issuing into real property either in the form of the object I have bought, and/or in the interest charged.
Banking really is a “confidence trick”, the bluff of which was called in e.g. the run on Northern Rock. And bankers use that confidence trick, as Richard notes above, to retain power. As Stephen Zarlenga highlights at the head of his website; “Over time, whoever controls the money system,controls the nation.” – Stephen Zarlenga, Director of AMI. Locally, of course, we have the excellent Positive Money site at http://www.positivemoney.org/, which is arguing the same point.
People really do NOT understand the nature of money in the modern world, still imagining it is ruled by the same rules as led to the execution of Charles l – he needed to raise MONEY (not just taxes, though he used forms of taxation to raise the money) and lost his head in consequence.
William lll, being FAR cannier relied on his Dutch experience and knowledge, to create money-less (i.e. non-metallic) money and wealth, so that in consequence he did not need to raise so much taxation to prosecute his grand design of neutralizing Louis XlV.
One could say, however, that in some ways his cure was worse than the disease, since the shape of government, as well as the political balance in Europe were both changed for the worse in some respects. For war and conquest became easier with the invention of the National Debt, while a weaker France led to a stronger Austria and, later a stronger Prussia and Germany, with the 19th and 20th century consequences we are still recovering from.
I agree with you on the writer of that letter to the Church Times
I find it almost incomprehensible that supposedly intelligent people can think that
Richard, Andrew
I think your problem is that that comment;
“banks do not create that money or debt. Only central banks, which are an arm of government, have the power to create money”
is believed to be true by probably 99% of the population.
There was recently a very good article on the BBC site by Andrew Horrobin who pointed out that almost everyone believes there is such a thing as “Road Tax”: a charge on motorists hypothecated to pay for roads. There hasn’t been such a thing for very many years.
This, apparently insignificant, error actually has a very real impact on the way motorists approach their relationship to cyclists & pedestrians.
In the same way, I’m sure people would think v differently about the dealings of banks & Government if they could understand the truth.
Does anyone have any bright ideas on how they could be educated ?
Yes, it’s called education on the importance of the state and community rather than education on how to consume
I’ve never read Zarlenga though I know of him. I learned about the bankster invasion by reading ‘Going Dutch’ by Lisa Jardine, where I learned that the invasion fleet William of Orange had with him was bigger than the Spanish Armarda and the whole takeover was funded by a Dutch banker. Add that to what I’d learned about George Downing and the Dutch (he was ‘our man’ in the Hague for a long time and I gather he learned to understand the power of debt there) from the biography ‘The Godfather of Downing Street’ by John Beresford and the whole takeover and the reasons for it (introducing debt so as to get the whole country working for you) sprang into perspective. I don’t believe William himself understood much of what was going on, he just wanted to be king of somewhere and he was perfectly happy to hand over the royal prerogative of money creation to the banksters in return for being king of here. He was just a front man for the banksters, just as Thatcher was their puppet more recently. We have to remember these villains linked up with the City somehow, I’m still not clear about the mechanics of that.
Agreed! Technocracy is only the ideology of non-ideology – the societal equivalent of the hidden curriculum, where powerful givens are left unexpressed, and so unexamined and challenged. “Freeing” the BoE, and failure to challenge and close down PFI, were GB’s greatest mistakes. The first was a gimmick and a hostage to fortune, the second a tragedy and a betrayal.
I fail to see the logic in this blog post. The indication that base rates will remain fixed until unemployment drops is an acceptance that the economy is in a fragile state and that certainty over the medium term interest rate outlook will help individuals and businesses with spending and investment decisions, which will will, in turn, help the economy. It is far from obvious that this is a fop to the financial markets, unless you’re of a left-leaning persuasion and/or sponsored by trades unions. Oh, hang on…….
I think to say that Bank of England independence is Labour’s biggest mistake is to ignore huge swathes of what they did over more than a decade. Better contenders for this crown would include:
– Wholescale failure of financial regulation (of which BoE Independence is only one part);
– Decimation of the pensions industry;
– Fiscal imprudence, including borrowing in a boom and off balance sheet financing (PFI/PPP) on a massive scale; and
– Wilful failure to address rampant house price inflation.
Now tell me what decimation of pensions?
Please don’t mention the withdrawal of tax relief on dividends: the impact was minuscule
And what would you have done on house price inflation? Did we hear a counter proposal, ever?
As for regulation: it was well documented that the Tories demanded much less.
And whilst I have always opposed PFI haven’t you noticed it was a Tory invention and has continued under this government?
If that’s the best you can do it it, to be kind, indication of there being no criticism to make