Prof Charlie Bean, formerly of the Bank of England and deputy director there for monetary policy, spilt the beans about what the Bank of England is doing this morning when dismissing the opinions of a certain Danny Blanchflower on Radio 4's Today programme at around 8.15am.
Bean made clear that the Bank of England's policy is to impose a 5% pay cut on the UK, as fairly as it thinks possible by the use of interest rates and QE, which means just about as unfairly as it is possible to be.
This, he said, is the goal because unless a cut in income is imposed the cost of war will not be suffered by the economy, and suffer it we must.
Nowhere else is doing this.
We do not need to do it.
Nor should we be imposing hardship, as he agreed was the inevitable outcome, and on which he dismissed the concerns Danny and I have.
He had no argument to back up his claim that we must suffer. He just said we must.
So what did we learn? It is that a dogmatic, unelected, profoundly unrepresentative and deeply privileged group have decided that it is their job to impose hardship on society. And, because they have the means to do so, that is what, with totally sadistic motive, they intend to do.
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Banking talk begins at around 2 hours 11 minutes.
https://www.bbc.co.uk/sounds/play/m001k7w6
I presume the red links to the glossary in your posts are made automatically (whenever the word or phrase is used)?
That can have some unintended consequences, such as the link here for ‘Nowhere’. You should at least be able to over-ride the linking when it is clearly inappropriate. I have noticed other examples, but this is the most glaring one!
I agree
I will see what can be done about that
Bean also said Blanchflower isnt too bothered about inflation.
Raising interest rate seems more and more like some kind of primitive ritual – a macho symbol – part of the culture wars, like wearing or not wearing a mask . But maybe its also a a marker of subservience to the US Federal reserve?
The non ritualistic option would be to examine carefully what precisely is causing inflation and what might be the best way of getting it down – with least damage to the economy – including citizens. Using interest rates to wreck the eocnomy seems like pulling down the whole building as the best way of mending a few roof tiles.
Sushil Wadhwani – Jeremy Hunt’s economic advisor on yesterday’s radio 4 WATO was really chilling , giving an approving nod to the fact that profits are pretty ‘healthy’ as he was saying interest rates have to go up and that the current 6-7% private sector wage increases (4pp below inflation) are inconsistent with the target BoE 2% inflation. Dismissed a query about the very low public sector wage ncreases out of hand.
He said he wouldnt take an individual month’s change as indicating anything significant – yet he, along with most commentators seem to have leapt on this single month – to demand another rate increase.
Agree with all that
And given I talk to Danny quite a lot these days I can say without certainty we discuss inflation often precisely because we are bothered about the best way to beat it
As Truss, Kwarteng and the entire Tory BS machine so ably demonstrated, evidence long ago was dismissed from the right-wing thinking process. It’s what keeps the show on the road.
WTAF??? This needs to be top of the news!!
They seem to be in such a hurry to break us, or disintegrate those who are already breaking…
Did I miss a UK or NATO declaration of war?
What is “standard” policy in the UK in **wartime**?
* Excess Profits Act – restricting war profits by 99.5% taxation on anything above pre-war profits.
* War Savings Bonds to remove disposable income from the economy – repaid with interest.
* Food and fuel rationing and price controls.
Well, at least it proves the Bank of England isn’t independent of government.
Due to expensive energy, fuel and food, most of us have considerably less money to spend on other things. Hospitality being one of the first areas to suffer. That is withdrawing demand and, according to Bean’s theory, will be deflationary.
Having to pay more for rent ( disproportionally poorer people ) will also reduce disposable income.
If anything the economy needs a stimulus. At least that’s my understanding.
I suspect Keynes would be as frustrated as he was by the fact was that governments could always find money for war.
Is the Bank as opposed to Keynes as they were in the 1920s and 30s?
Your understanding is rate
Bean is totally wrong
Which is why we need to return the power to raise or lower interest rates to the Chancellor of the Exchequer as we had before Gordon Brown landed us with the MPC.
TomC: The power to set interest rates is already reserved to the Treasury.
Section 19 of the Bank of England Act 1998 said:
“19. Reserve powers.
(1) The Treasury, after consultation with the Governor of the Bank, may by order give the Bank directions with respect to monetary policy if they are satisfied that the directions are required in the public interest and by extreme economic circumstances.
(2) An order under this section may include such consequential modifications of the provisions of this Part relating to the Monetary Policy Committee as the Treasury think fit.”
Expecting the Treasury to take the flak is perhaps a wish too far, though.
Having read ‘The Capital Order’ by Clara Mattei please forgive me if I say that I not surprised?
It’s austerity all over again. Indeed , have we ever been out of austerity in this country in some form or other?
This is Mattei’s history coming back to life. It shows how deeply ingrained austerity practice is in British state craft and monetary policy.
The BoE are playing the ‘apolitical expert card’ deployed in post WW1 Britain and since.
But what is the motive?
Well the motive is one simply about maintaining the balance of economic power in the face of facts that require a change.
There is no way ordinary people are going to be allowed benefit by seeing incomes rise, because that is too empowering of ordinary people for certain sections of the Establishment. If we got more wages, according to them we’d want more unions next, more rights and God -forbid – more say in how work worked.
Only the Establishment deserve apparently to see their income go up and they use interest rates and the low wages and a workforce of whipped curs to maintain their wealth.
The rest of us are just not in their exclusive club. They’re special.
So now let’ see what the poxy-ticians (sic) have to say about this? Let’s see their reaction – but more importantly, let us see what Laboured has to say about that shall we?
Let’s see what they have to say about what the ‘experts’ have gone and done?
Great post BTW. But honestly folks – read Mattei – she’s nailed it.
Thanks
Mattei did a half hour interview with Prof Richard Wolff about her book on his weekly podcast/you tube show Economic Update. The full title of the book is Capital Order: How Austerity Paves the way to Facism.
Danny Blanchflower was on the World at One giving his opinion about the rate rise.
We discussed it
“the cost of war will not be suffered by the economy”
I have no idea what that means, why we have to do it, how we measure it, and what is the intended outcome.
With that in mind, the only option is to follow the money, and see who gains: those with money. Is this just a Tory exist strategy?
Resolution V of the Brussels Conference of 1920 spells it out (see p154 of Mattei’s book):
“The complementary steps for arresting the increase in inflation by increasing the wealth on which the currency is based , may be summed up in the words: increased production and decreased consumption. The most intensive production possible is required in order to make good the waste of war and arrest inflation and thus to reduce the cost of living; yet we are witnessing in many countries production below the normal , together with those frequent strikes which aggravate instead of helping cure the present shortage and dearness of commodities…”
Plus ca Change
Its the subtext of the Mattei book thats the most worrying “austerity paving the way to fascism”.