I posted this short video this morning. In it, I argue that the Bank of England is threatening to undermine the economic policy of any new government by keeping interest rates high. Why are we putting up with that?
This is the transcript:
The Bank of England is probably the biggest impediment to economic well-being in the whole of the UK at present.
How do I know? We have new data on unemployment from the Office for National Statistics. And what does it show? It shows that the number of people who are unemployed in the UK is increasing. It has gone up by well over 100, 000 people.
It also shows that the number of people not working at all in the UK because they've left the employment market has gone up by well over 100, 000 people.
So the Bank of England is getting its way. It is imposing an economic downturn on the UK with a consequent rise in unemployment.
And that is its goal.
If that's its goal, it must be harmful to our economic well-being, and it utterly destroys the economic policies of any political party that is based on growth.
So what are they going to do about the Bank of England?
Thanks for reading this post.
You can share this post on social media of your choice by clicking these icons:
You can subscribe to this blog's daily email here.
And if you would like to support this blog you can, here:
Buy me a coffee!
Clearly the Bank of England (BoE) work for the well-off. The more money you have the more interest you get.
Interest is passive income, so there is no productivity, which results in no economic growth.
The BoE do not benefit the people and our economy
“So what are they going to do about the Bank of England?”
Hazarding a guess, Reeves will have a nice cosy lunch with assorted BoE bigwigs and treasury people. Beliefs will be agreed and reinforced (think of this as the equivalent of prayers – the assertion of public faith amongst the faithful), and various courses will be charted. Window dressing of various sorts will be planned (to keep LINO voters happy) and Mother Courage’s waggon will roll on (the Thatcher era has lasted 50% more than the 30 years war – & in many ways just as destructive).
The problem is that LINO, BoE, treasury etc are immune to criticism – water off a duck’s back, cognitive dissonance fully deployed.
I see revolution looming.
I too see a revolution looming, a revolution that will require scapegoats.
I suspect the Governor will not be one of the scapegoats, nor Rachel and the guys and gals at the Treasury.
@ Mike Parr
“…various courses will be charted….”
I think you mean various courses will be consumed. Accompanied by rather expensive vintages recommended by the sommelier.
Personally, I think that protecting the value of our currency is important, given the amount of things that we import – most relevant would be things like energy which is priced in US Dollars, but it applies to a broad range of economic goods.
Why do you think differently?
I don’t
I think the value of the curtency is not based on interest rates but on the productivity of the economy, which the Bank of England is destroying
Why aren’t you interested in the real economy?
If you think that exchange rates are not linked to interest rates and the future path thereof (despite a huge industry managing currency risks and exposures based on exactly that premise) then it’s no wonder you ignore it in your ideas.
Ah, you’d like me to buy your mythology about the wondrous power of gambling whilst ignoring the truth
I get you
I also note you are a troller
On a point of fact,
oil in $, gas is usually TTF Rotterdam – Euros (TTF = Title Transfer Facility). Elec is in £.
Oil in the Uk is +/- 100% transport (no power generation using oil to speak of).
Gas – LNG usually $ – UK produces circa 50% of what it uses and this is priced relative to TTF.
Arguably, US LNG has to compete against EU gas (or Russian gas) – so regional pricing – that said the diff is often quite considerable.
The Bank of England’s remit does not include ‘protecting the value of the currency’. So why do you think they should do so?
Protecting a high value of currency is also destructive to industries who need to export goods.
The value of the exchange rate doesn’t really mater, which is why nearly every developed economy has a free floating exchange mechanism. What matters is global monetary stability. A country can’t isolate itself from foreign financial troubles. And it is best to coooperate rather than try to outcompete by government overvaluing/devaluing the currency.
Spot on Bill
This obession is 50 plus year old out of date
Thank you and well said, Richard.
Yesterday evening, I watched the state, but not oligarch, owned France 2 evening news and was amused to hear two things that will make this community chuckle:
Macron and his justice minister warned of anti-semitism on the left*. Apparently, wanting to stop genocide and waving the Palestinian flag in the National Assembly is anti-semitic and illegal, but, with regard to the latter, not when the people making such ritual smears wave Ukrainian and Israeli flags. *Some Jewish leaders and intellectuals have said they will vote for the former National Front.
The business correspondent warned about the economic programmes of the former National Front and, on the left, New Popular Front, not dissimilar, and, with a photo of Liz Truss, sic, in the background said how bad things could get.
There is something especially bizarre and short sighted about the Israelis and their supporters elsewhere aligning themselves with the Right, or rather the Far Right that it has become. These are people who were anti-Semites five minutes ago and will be the same again before long. That includes Farage and Co. Those from the liberal Jewish tradition fully understand this. It won’t end well.
Depressingly, I’d argue the Bank of England is only one of a number of threats to the poorest and most deprived. The people who most need our immediate help and support are mostly being ignored and further marginalised in this GE, by both potential parties of government.
Let us be under no illusions as to where we are now. Under neoliberalist conservatism both fiscal and monetary policies are intended to create and maintain poverty.
It is a truth universally acknowledged, and a core belief of conservatism historically, as well as currently, that poverty, and especially hunger, are absolutely necessary to ensure a compliant working population.
This 18th and 19th C mindset also dominated Thatcher’s monetarist thinking, and had renewed primacy with Osborne’s austerity agenda.
It is absolutely integral to current neoliberal ideology.
“Everyone but an idiot knows that the lower classes must be kept poor, or they will never be industrious” Arthur Young
“Poverty is … a most necessary and indispensable ingredient in society, without which nations and communities could not exist in a state of civilisation. It is the lot of man. It is the source of wealth, since without poverty, there could be no labour; there could be no riches, no refinement, no comfort and no benefit to those who may be possessed of wealth.” Colquhoun
“It is only hunger that can spur them on to Labour. Hunger is not only a peacable, silent, unremited pressure, but, as a natural motive to industry, it calls forth the most powerful exertions”
“Hunger will tame the fiercest animals, it will teach decency and civility, obedience and subjugation to the most brutish. the most obstinate, and the most perverse” Townsend
200 years later, the unstated aim of fiscal policy through austerity was simple and intentional. The government of 2010-2015 knew exactly what they were doing.
A Treasury report on Osborne’s ideology in 2012 noted – “the cuts disproportionately hit lower-income groups”.
Barely five years later, UN special rapporteur Prof Philip Alston commented on the success of that deliberate increase in poverty:-
“14 million people, a fifth of the population, live in poverty. Four million of these are more than 50% below the poverty line, and 1.5 million are destitute, unable to afford basic essentials”
“UK standards of well-being have descended precipitately in a remarkably short period of time, as a result of deliberate policy choices made when many other options were available.”
Alston commented that the cause was the government’s “ideological” decision to dismantle the social safety net and focus on work as the “solution” to poverty.
At the same time a DWP spokesman confirmed that:
“All the evidence shows that full-time work is the best way to boost your income and quality of life,”
But…..and as any fule kno, the Bank of England deliberately raises unemployment as part of monetary policy. Andrew Bailey himself has reported that increased borrowing costs are meant to drive up the jobless rate to help reduce inflation.
“The price for taming inflationary pressures from Britain’s tight labour market is an increase in unemployment of around 350,000.” 2023 Resolution Foundation
The BoE then argue, disingenuously, that they are actually helping the poorest !!
“High inflation affects everyone, but it particularly hurts those who can least afford it.”
Aye, right.
However, unemployment, insecure employment and low wages hurt just as much, f not more.
In the MPC’s Aug 2003 projection, the unemployment rate was then projected to rise to just under 5% by 2026 Q3
Despite this Andrew Bailey has said repeatedly that the UK jobs market is close to full employment, as just a few weeks ago he stated:-
“The British economy is in a period of “disinflation” with “full employment”
Unemployment has increased from 4.2 – 4.4% this month.
Where we are :-
1) The poorest are firmly and permanently wedged between a rock and a hard place;
2) Poverty has been deliberately increased through both fiscal and monetary policy since 2010 as a result of both ingrained Tory dogma and neoliberal ideology, allegedly to create a compliant supply of workers in the employment market;
3) The Labour manifesto offers no poverty reduction strategy or any practical measures;
4) The BoE do not even have a clear idea as to what full employment is, or data to support their analysis or policies;
5) The Bank of England are intentionally making poverty in the UK worse, yet are claiming the opposite;
6) There is no sensible argument for retaining BoE independence from the Treasury and the application of the complementary tools of fiscal and monetary measures need to be integrated.
Mike Parr writes of ‘revolution’.
A revolution is possible … by the descendants of the likes of Rupert Murdoch. They surely know that the climate affects them and there is no private climate that can be bought.
Also, oligarchs themselves might come to understand that the best chance for their families will be to work for the prosperity of the entire planetary living space. They can’t all be stupid.
Earth.org list problems: Species Extinction; Ocean Acidification; Food Insecurity; Deforestation; Plastic Waste Crisis; rising maximum and minimum temperatures; rising sea levels; shrinking glaciers and thawing permafrost. https://earth.org/climate-change-problems-and-solutions/
Columbia University list of Ten Climate Change Impacts That Will Affect Us All: 1 Damage to your home; 2. More expensive home insurance, 3. Outdoor work could become unbearable. 4. Higher electric bills and more blackouts, 5. Rising taxes, 6. More allergies and other health risks. 7. Food will be more expensive and variety may suffer. 8. Water quality could suffer. 9. Outdoor exercise and recreational sports will become more difficult. 10. Disruptions in travel https://news.climate.columbia.edu/2019/12/27/climate-change-impacts-everyone/
Three weeks ago, Sir David King, founder & chair of the global Climate Crisis Advisory Group wrote
“Humanity’s survival is still within our grasp – just”. But only if we take four radical steps
Reduce emissions, build resilience, repair ecosystems, remove greenhouse gases.”
https://www.theguardian.com/commentisfree/article/2024/may/27/humanity-survival-emissions-resilience-ecosystems-greenhouse-gases
The ‘revolution’ needs to be much more than just meeting net zero objectives.
Paris is almost a decade ago and the undershoot is just .. well … depressing.
Growth in energy consumption alone has been at 4x the rate of renewables development since 2007, (ignoring growth in materials extraction and consumption).
King’s list of –
“Reduce emissions, build resilience, repair ecosystems, remove greenhouse gases.”
….then also requires a reduction in materials and energy demand and consumption in the global economy, so degrowth, to work.
I’m a little concerned that “remove greenhouse gases” refers to carbon capture which can only be a very minor component of climate action, and which is currently being used as a justification for fossil fuel expansion for the next century..
Where the banksters fit into this is difficult to say, but I’d regard institutional inertia and groupthink as providing obstacles.
Thank you, both.
@ Joe: Further to your mention of Murdoch, most people don’t know that he and Farage go back thirty years ad Farage is his sock puppet. The Farage faction was helped to oust Alan Sked, broaden the policy offer from just a fixation with Europe and distract the Tories and others from media ownership reform. Leveson II may have brought this into the open.
Farage doesn’t need Murdoch. The BBC is happy to facilitate. I note many people say it’s the Tory leadership at the top of the BBC that orders this sort of output. I strongly disagree and suggest a that these views are far more prevalent at the BBC than people care or dare to imagine.
With regard climate change, a couple of years ago, a presentation was made to oligarchs in NYC how climate change would provide opportunities like new coastal resorts in what is now inland, vineyards in the northern plains, farming in desperate countries (i.e. seizure of farm land and water resources) etc. The younger members of the Koch family, in particular, are investing in disruptive technology.
Richard and I have said it often before, “The planet can’t afford oligarchy.”
Gotta love central banker-speak about “tight” labour markets and “easing tightness”. Most people would think of a tight labour market as one where it’s hard to find a job. Central bankers mean nearly the opposite. Tells you whose interests they’re looking after.
Thank you and well said.
This sort of thing is not untypical.
Richard and I have written about how trade unions can’t be bothered to engage on monetary policy. This is the consequence.
It is sad that they will not
They see it as beyond their remit – only fiscal matters to them
And that is utterly bizarre
It amazes (and saddens) me that unions are still so closely-allied to “NuNu” Labour. Didn’t they see the writing on the wall with Blairite PFI-PPP deals? And the donations balance between them, ordinary (direct) members and corporate/HNW individual donors will surely tell them their influence is diluted to a pale pink wash over the neoliberal canvas? How are they serving the interests of their members? Still looking for ‘good, well-paid jobs’? (Well, I suppose that was their founding purpose?) But therefore supporting ‘growth as the way to provide them’; and failing to understand the influence of monetary policy on distributional effects. Can’t they afford to employ a few decent ‘heterodox’ economists?
Right Richard!!
The question is – what to do about inflation.
Economists often say we can’t have price controls – cure worse than the disease. Surely that is more true for increasing unemployment. Particularly when this was crisis inflation, not typical inflation.
I doubt very much high rates are responsible for the gradual reduction in infkation