This was published overnight and I got an electronic copy:
It's the new book on economics from the Bank of England.
I've read the first twenty pages or so, so far.
My initial review can be reduced to two words: conceited and patronising.
And sometime they'll get through their egotism and start talking economics, I hope.
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So this is the same institution that doesnt remember what Keynes did when he worked for them in 1917, printing money to buy a War Stock.
Not quite right. The most famous Government stock issue; 3% War Loan, 1914, which was the largest ever Government stock issue ever made, to fight World War I: it simply failed. It did not raise the funds and sell out the issue, by a large margin. The fact nobody wishes to remeber is that the target investor “capital”, simply refused to back Britain in the war; a fact Neoliberals typically do not like to discuss, probably because to use a phrase they like, “nothing has changed”.
Meanwhile, the Bank of England and Treasury in 1914 pretended the issue had succeded spectacularly; in secret the Chief Cashier was credited as lending the shortfall in the books (no, really) and the Bank and Treasury (facts known only to a small cabal sworn to eternal secrecy) pressed on as if the War Loan had been a success; indeed the Press widely reported it as a triumph of British power and prestige. In short, they had printed vast sums of money out of thin air, because thre was nothing else they could do. It worked. Britain financed the war, in part out of thin air. We may assume Keynes was in the secret; he was the closest, trusted adviser of Bonar Law, the Chancellor.
The Bank of England finally acknowledged the truth only in 2017. I have referred to this matter before. I do not think its importance is yet fully understood.
Clearly the Bank of England has learned nothing from the experience. They still seem to think waffle works best on the British public.
I am sure Keynes knew
Their money printing worked
I think I’ll give it a miss.
This doesn’t surprise me. I got the same vibe from the governor’s interview the other day. I’m not going to hold my breath expecting them to change.
I’m not sure it is entirely fair to judge them on the first 20 pages! As I understand it, this is meant to be an exercise in public outreach rather than an academic paper. I fear it may be an exercise in recapitulating theoretical economic orthodoxy, rather than looking at how the economy actually works in practice, but I’d be interested to hear your view after getting to the end.
I understand their trite answer to the question on the cover is “because inflation”. Which is interesting, because despite money being pumped in the system since 2008, we haven’t had inflation until the last few months.
So, has there been a noticeable loosening of monetary policy in the last six months? Is this a decade and a half of chickens coming home to roost? The wrong sort of money perhaps? Or maybe it is not so simple, and other events have an impact.
So far, this is deeply conventional
And that actually also fits with what I said
Can’t believe they want people to pay £12 for the privilege.
I discovered yesterday that the two authors gave a presentation of the book at LSE on Monday. This is promoted on the LSE website and available on Facebook at https://www.facebook.com/watch/live/?ref=watch_permalink&v=375610124618657
During the Q&A, they were asked to provide the answer to the question posed by the book’s title.
This was the answer – “Printing more money causes inflation. If you print too much money, it’s worth less. When inflation is low, the Bank of England prints more money. If inflation is too high, we rein back on that.”
[at around 44 minutes]
Hence my reluctance to buy the book.
Wow – that was a staggeringly first year undergraduate neoclassical answer
One completely confounded by simple observation https://evonomics.com/moneysupply/ ““Based on our examination of countries that together constitute 91 percent of world GDP, we suggest that high inflation has infrequently followed rapid money supply growth, and in contrast to this, high inflation has occurred often when it has not been preceded by rapid money supply growth.”
Very good. Thanks
Indeed. Pathetic, isn’t it. If only the issues were less important.
Investopedia haș these points as the key takeaways of neoclassical economics;
1) Classical economists assume that the most important factor in a product’s price is its cost of production.
2) Neoclassical economists argue that the consumer’s perception of a product’s value is the driving factor in its price.
3) They call the difference between actual production costs and retail price the economic surplus.
I know you a a Marxist so have a different agenda but with points 1,2 & 3 what is there to argue about?
You’re not a boxer
And I am not a Marxist
Which, pretty much knocks out the relevance of your question in my opinion
The Chinese also tried Marx’s theory of value and ended thinking that it was just ONE of many factors to be taken into consideration and even dispensed with depending on contexts – market conditions, supply, time of year.
The Chinese approach is exactly that which the Mile End Economist advocates: If you want to know what is happening in the economy (or anything for that matter) GO AND LOOK.
Time of year is more important in an agricultural system than an industrial system, with operating steel mills, for instance; they have to be active all year because furnaces can’t be shut down. But I know they know this. On a different note, I wonder how climate change will affect their tea plantations, one of their largest ‘industries’.
I strongly suspect that the massed ranks of BofE economists contain nothing but the most orthodox of economic thinking, reflecting what they were taught at Oxford and LSE over the last 20-30 years. Andy Haldane when chief economist showed the odd hint of more heterodox thinking – maybe thats why he jumped ship to the RSA. He strongly supported the RSA’s Citizens Economic Council work.
So the book is no more than we’d expect – we should not be ‘worrying our pretty little heads’.
In this case I really have had enough of ‘experts’.
I am likely to be disappointed by this book, unless it addresses the real blindspot of national economics – namely how a national economy operates within a Global market. Imagining that the national economy can be managed in isolation from Global forces has either caused, or exacerbated the effects of every major economic crisis of the last 30 years.
1) From 2000 – 2007 interest rates were consistently kept too low, on the evidence that UK inflation was within target range. However, the reason for this was the mass movement of manufacturing to a much lower wage economy in China, which masked overheating demand in the UK economy. We saw prices fall for many manufactured items from TVs to bicycles, and supply was more than enough to meet credit fuelled demand in the West. However, in the one market where supply was really constrained – housing – prices ballooned, leading to the 2007/2008 financial crash. A small minority of economists had said for a while that BOE should be raising interest rates, to lean against rising rising house prices, but no-one wanted to hear that. The rest is history.
2) From 2008 onwards, the BOE flooded private banks with quantitative easing, while doing nothing for ordinary householders, some of whom were stuck in negative equity. The initial BOE reasoning was to shore up asset values and prevent further banking collapse, but the longer QE went on, the clearer it became that this was over-inflating stock markets and house prices, while working families suffered through austerity, and Global wage competition. Inequality was rising faster than ever, leading eventually to a backlash against Globalisation in votes for Trump and Brexit.
3) From 2016 onwards the backlash against Globalisation really started to put up barriers to international trade. But something else was also weighing on Global markets – the growth of middle class consumers in emerging economies. For decades 1 billion citizens of rich economies in Europe, North America, and Japan, had the whole Worlds resources at their disposal. But with new found wealth, emerging countries are increasingly consuming at Western rates, including 1 billion in China, and a potential further 1.2 billion in India, as the Worlds fastest growing economy today. The pressures this will place on supply chains and resources are unprecedented, and likely to lead to ongoing Global inflation. This crisis has only come to a head in 2022 because of a perfect storm : the rapid bounce back from Covid19, the war in Ukraine, and breakdown of free international trade from Brexit and Trump. But the underlying story is clear for those who want to see it – a future of greater international competition for limited Global resources.
In the face of Global inflation, G7 countries will need to reset our expectations about unsustainable consumption in the West. However, there are various economic tools we can use to do this. The worst of all options is raising interest rates sharply in an attempt to bring on a recession and shrink the economy, so as to bring it in line with our proper share of Global supply capacity. An alternative policy would be to support our poorest households, and allow inflation to naturally shrink our consumption. But inflation erodes the capital of the wealthy, whereas raising interest rates benefits them, and throws the pain onto the poorest – the people most likely to be in debt.
No prizes for guessing who’s side the BOE has chosen. just as they have in every previous crisis. Perhaps their book would be better titled “Heads we (the rich) win, tails you (the poor) loose”!