Andrew Bailey from the Bank of England is featured in the FT today. It is hard to know whether the attitudes he displays are best described as patronising, grandstanding or gaslighting. I think all three might do.
They reach their apotheosis in this paragraph:
Bailey insisted that he did not need to see inflation drop to 2 per cent, the BoE's target level, before cutting rates, but he said the key point was “you need to see you are on the way”.
As I unambiguously demonstrated yesterday, we have had under two per cent inflation on average over the last ten months. Prices are still falling, especially when it comes to energy, which is key. As a result it is already known that this trend is extending. But Bailey wants more evidence, even though it is staring him in the face.
The reality is that the Bank of England is now the biggest creator of inflation in the UK economy. High interest rates feed straight into rents, higher prices on rented goods, and the price of things like phone and car contracts, which do, of course, include an interest charge on the borrowing implicit in the phone rental charge that they include. And businesses obviously need to recover their costs more generally.
But still, Bailey insists he must see the signs that inflation is over. This can only mean that he wants to see a permanent shift in reward from labour to capital to compensate for the extra costs he is imposing.
The pretence that he wants certainty is a sham. He knows he has it. He just wants to promote the interests of capital now, and is indifferent to the risks of recession and deflation whilst doing so.
He makes the case for ending central bank independence incredibly well. It is the only thing he does do well.
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Andrew Bailey’s thoughts and actions could be explained by cognitive dissonance. Maybe he needs to get out of the BoE silo and experience the real world?
Thank you, William.
I have known Bailey since the spring of 2008 and worked with him on and off. We have even shared a bottle of wine at the stock exchange. I know and have worked with his contemporaries like Paul Tucker, Andy Haldane, Paul Fisher and Sarah Breeden.
Bailey is good politician and saw off the above competition. No central banker and regulator I know thought he should get the top job.
He was the only doctoral student in his intake and is one of the few Bank officials not to have worked outside, even on secondment.
How very interesting is that. In effect then like so many of the current generation of politicians, someone then who has their hands on the levers of power which determine the prosperity, general health or otherwise of the rest of us, but without a clue how it actually does affect the rest of us, because it is not lived experience on so many levels. It explains in large part why we are in the mess we are in.
Chanelling Brexit:
an “unelected banker” who has an immense impact on UK subjects & their well being (or lack thereof) & who has never worked “in a real job or “in the real world”.
Meanwhile.. 12 million UK serfs in absolute poverty.
To make sense of anything currently happening at the Bank of England I think it is best viewed as part of the Tory election campaign that is all building to the much under-discussed, later in the year second budget that Jeremy Hunt keeps referring to.
In the same way that professional comedians say that jokes work best if told three at a time you can reasonably expect that Hunt’s joke tax giveaway will be accompanied by joke announcements from the Bank of England and Sunak’s Joke claims that the sunlit uplands are just around the corner.
“The reality is that the Bank of England is now the biggest creator of inflation in the UK economy. High interest rates feed straight into rents, higher prices on rented goods, and the price of things like phone and car contracts, which do, of course, include an interest charge on the borrowing implicit in the phone rental charge that they include. And businesses obviously need to recover their costs more generally”.
And mortgages. Who is running the economy, the BoE or the Government? Whom is independent of whom? If the BoE is independent (as is claimed by Conservative and Labour); effectively it is running the country. The MPs should just go home. Note that even for something that is nothing to do with the economy, the Government cannot even manage to pass its own bill through Parliament. Meanwhile the Scots found out two weeks ago that the Speaker can make their elected representatives redundant, at the drop of a hat; and without redress. There is no point in electing MPs. We have farmed out political responsibility.
Mortgages increases are not in the inflation calculation
They just drive people towards poverty
No, but the effect of interest rate rises increases mortgage rates, and this in turn reduces spend elsewhere, that will ‘trickle down’ through the economy with adverse consequences.
When Sunak clings on to the idea that he has “a Plan” that is “working” he is trying to point to inflation reducing, recovery in the economy, and even alleging debt reduction (in the case of inflation it is nothing to do with him, even according to his own sloppy standards, since he claims the BoE is independent). Even ignoring the dubiety of his extravagant claims (he has a notorious record of using misleading references and claims, even in Parliament), or the rewriting of panic policy made on the hoof, as a “Plan”; such effects he crows over are bought at the expense of serious rises in poverty, in homelessness, in ill health, in mental health, in the well-being of children, in general living standards, in poor dental provision, in an over-stretched, under resources NHS, in Waspi women being mistreated and cheated by Government, in Postmasters/Mistresses still still without proper justice or redress, in the failure to address the contaminate blood scandal; or compensation; in serious failings in the state of Britain’s armed forces; in a colossal waste of money on HS2, on PPE; in the failure of privatisation in rail, in domestic energy provision, in water and sewerage provision; and the decay and disintegration of our infrastructure. The whole world has already left us far behind. That is the reality; not Sunak’s ridiculous, feeble-minded “Plan”. He should be embarrassed to implement it. He should not need to be voted out of office; he should be ridiculed out of office. We cannot even manage to do that.
The fact is fourteen years of Conservative government has lead to ruin, and the demonstrable proof that we have a whole generation of politicians in both Conservative and Labour who are so hopeless, helpless and inadequate, when confronted with the real problem of government, it is beyond them even to face, still less work out any solutions.
Accepted
To clarify and simplify my point. Sunak is not just pushing an inflation triumph; he is trying to sell the idea he has a “Plan” and can claim success. In fact the Conservatives have botched fourteen years of bad Government; and have cobbled some short term sound-bites, as the New Big Idea. If it wasn’t so serious we would all treat it the absurdity of the “Plan” as a spoof, so bad is the unrelenting misery inflicted on so many millions of people by a disastrous, incompetent government; and treat Sunak as the spoof PM he so manifestly has become.
The defining picture of Sunak’s premiership is as the witless waiter, unable to serve the correct dish to the right table; promoting his Big Covid Idea: “Eat Out to Help Out, the Virus” (Sir Chris Whitty).
Surely most business people can see this? Why don’t we hear more from them? Or is not reported?
Thank you, Ian.
As a bankster and lobbyist and, with a small farming and holiday lets business in the tropics, please let me try to answer.
Many, if not most, people in business know only their micro economy and most are probably trying to survive.
If you are like the Wiltshire beef farmer leading the farmers’ union, your prejudices outweigh the impact of Brexit on your business / industry.
Business knows it has a bad reputation and often thinks speaking out will only make things worse. That was the case for Brexit after so many City scandals.
The MSM is not interested to find out what goes on outside their SW1 bubble. Business to them equates to banking*, PR, upscale eateries and services catering to the well off. *Not even the wider financial services industry / system. State-owned BBC and C4, advertising dependent ITV / ITN and Wall Street-owned Sky will not rock the boat. The oligarch-owned press is similar.
Thank you Colonel,
I am a humble retired teacher and counsellor who has learnt a lot in the years since the GFC.
In my youth I did work in a factory making real things. Several of my mates worked making aircraft. I was an ATC corporal and followed their work with some interest so I tend to think of them as business as much as the financial sector.
I suspect some of those making things or delivering services also read about things which affect their work and have worked out we are not in ‘an over heating economy driving inflation’ and can see higher interest rates don’t really affect the inflation they are dealing with. But I also suspect few of them are now members of a political party or that journalists don’t come asking their opinion. In the 1970s the two main parties had membership in the region of a million.
Thanks again
Is that a reference to Minette Batters?
How many people are members of political parties? A tiny minute fraction of the population.
Corbyn made Labour the largest political party in Europe with 500,000 members, now mostly disenfranchised by Starmer, which shows that people just are not interested enough to be part of it.
Not sure quite what that says!!
Thank you to Ian and John, above.
John said: The defining picture of Sunak’s premiership is as the witless waiter, unable to serve the correct dish to the right table; promoting his Big Covid Idea: “Eat Out to Help Out, the Virus” (Sir Chris Whitty).
It was worse than that. Shortly before that nonsense, Sunak bypassed Whitehall, a habit he makes of when visiting California, and invited some herd immunity enthusiasts to the Treasury. That was the rationale. There were over meetings over the summer. These came to light not long after.
If one thinks Sunak is a dangerous empty suit, there are equal, if not worse, horror stories about his predecessor as Chancellor, including from my former employer Deutsche. Bailey is aware of some, too.
Bailey seems to have made a career from not seeing what’s staring him in the face. No-one without the required specialist knowledge will understand this though which I imagine is how he gets away with it. The reality will be too complicated to ever be useful as a vote-catcher so politicians won’t be wasting their time trying to explain it, not when they’ll be far better off declaring fantasy plans for filling potholes and putting chickens in every pot, this after first providing the pots. The whole political system’s useless to us by definition then, plainly unable to affect the really important issues as they’re beyond the ken of most voters.
So, post-politics, what comes next?
My instincts tell me it was he who contrived to pull Truss down before she could replace him . I would be interested to know whether any readers know of evidence or corroborating circûstantial gossip to confirm….
Thank you, Roger.
You may very well think that, but one could not possibly comment. Bailey was slow to act and allowed a situation that had been deteriorating for some months before Truss became PM to get worse.