Unless you ignore all news outlets you will have been as aware as I am of the horror playing out in Gaza and Israel. Just watching the news has become hard on many occasions. The inhumanity of which people - on both sides in this conflict - are capable is hard to come to terms with.
Financial markets do seem unaware of all this. Despite the threat to stability that this conflict creates - which is being played out in arena far from the conflict zone as well as in it - markets seem to think that the big issue of the day is still whether interest rates should go up or not. This is, apparently, a finely balanced decision still. The fact that US 10 year bonds hit a 5 per cent yield for the first time since 2007 is apparent indication that rates do need to rise, for some at least.
Except that they do not, of course. The world is suffering the risk of turmoil which is bound to be recessionary.
All the signs are that climate change is getting worse faster than anyone really expected, requiring ever more urgent action on a grand scale, for which low rates are essential.
Meanwhile, the reality on the ground is that people are suffering. Talk is now of people living in destitution in the UK, and not just in poverty.
We face many crises. Without exception all of them are more important than inflation, by a very long way. All inflation at current rates does is slightly disrupt markets in the short term, and they are more than capable of adjusting to that fact if only wages and benefits are allowed to move in line with the value of money.
The need to refocus economics on the issues of consequence that we face has never been more pressing, but we set up the whole system of economic management of this country to make inflation the only issue of concern. That was the inevitable consequence of supposed Bank of England independence. Now we are paying the price, because as a result everything about our economic policy misses the point of what is really going on in the world.
Cutting interest rates is vital now.
But so too is abandoning the crass stupidity of central bank independence, which always presupposed that there was an actual difference between economic and monetary policy (when there is not, because they are the flip side of each other) and that only inflation mattered.
The only problem is that, as on so much else, Labour is backing the wrong policy here. Rachel Reeves is not going to shaft her old bosses at the Bank. But she should if she wants Labour to make a difference.
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Much to agree with.
At least the BoE’s “independence” is for all intents and purposes synthetic and there is the possibility of political control (if the political chimps want it).
Not so the ECB, over which there is zero democratic control & which does as it pleases (its owner the German Bundesbank has the same status in Germany). This reduces Euro-zone countries to the fiscal/monetary equivalent of Uk country councils: raise taxes, issue bonds – that’s it. Discussion in Brussels/EU institutions as to where the money will come from to finance the de-carb/energy transformation that the EU needs are sterile. Indeed, what I hear is mostly whining & hand wringing. The neolibtards are in full control of money & the imbeciles in the Brussels village don’t even see it: pathetic and enraging by turns.
If you wanted an argument for NEVER re-joining the EU (Ingerland or indeed an independent Scotland) one could hardly manufacture a better case. Only an imbecile would EVER consider it, given current structures. And for the avoidance of doubt – the above is not my just views, but held by senior people within the European Commission (not all are mad or bad). Lagarde and the assorted chimps in the ECB (ditto the BoE) have a great deal to answer for, they are the ones, directly responsible for delaying meaningful action on de-carb/renewables/energy efficiency etc. If there is no money (or its costs too much) none of the actions needed become possible.
Exactly right about (Does Not) Reed and Labour.
We need real change given (for example) that the Tories are scrapping caps on bonuses (because they think it increases GDP no doubt, stupid oafs).
On my to do list if I won the next election would be the sacking of Andrew Bailey – what a numpty-boy he is making out that the rich ARE the economy. Useless.
I also note from Steve Keen’s blogs that this idea that somehow central banks borrow other people’s money (and do not create it) is being promulgated AGAIN in economic circles, proving once again how the concept of money as debt gets abused to support the narrative of the rich and negate state power – the very institution that created bloody currencies in the first place!
Once again our universities and institutions (the Nobel Peace prize to Ben Be-wanky for example) provide a bulwark for the lies we are told about money against the real facts.
At least this behaviour shows once and for all the opportunistic, short term extractive behaviour of high ‘finance’ – meaning that they do nothing but finance THEMSELVES – their lavish lifestyles and political dominance – as Christine Lagarde noted previously.
Bastiat would not be happy with that! But the problem is who is looking on and seeing the same things we are?
Too few I wager………….
As for Gaza, the kill fest continues it seems unabated. Now I hear that the U.S knew that things had been ready to blow for some time. The U.S veto of UN sanctions on Israel’s behaviour seems somewhat rather ill-judged. The U.S. has made things worse. What a mess. So many innocent Jews and Muslims are suffering because of political failure. It all feels like 1982 again.
Too little a reaction here to Tory cruelty – too much an over-reaction in Gaza, both having shit politics in common.
What a mad world.
Given his behaviour while at the FCA, I’d suggest you should be jailing Bailey, not merely sacking him.
Thank you and well said, Bill, but please see my comments below.
Well Bill, yours was the second most reasonable one of the three options I considered for Bailey. You can use your imagination to work out what the third and ‘final’ one was I’m sure.
War is inflationary; if only interest rate policy could control war.
Extreme weather boosts food prices; if only interest rates could alter the weather.
The truth is that Central Bankers are impotent – only politicians can begin to tackle these issued… but have failed so far.
Agreed
At town halls to present my employer’s results and accounts, the jump in profits were attributed in large measure to war. War! What’s it good for? Banks! Not just net interest income and no passing on of interest to savers, but commodity trading and wealth management, too.
Thank you and well said, PSR.
There’s one thing about Bailey. He’s a good politician and knows where the bodies are buried. He buried some himself, including from a former employer of mine and a firm which employed his champion at the cabinet table, which helped his chances of becoming governor, much to the amazement of Whitehall and the City, by the latter I mean the Bank, and FCA and the firms they regulates.