June 2nd, 2011

The Bank of England’s Great Inflation Swindle

Before finishing his term on the Monetary Policy Committee Andrew Sentance warned that the Bank of England is in danger of losing its credibility on inflation. Guido has been warning since 2008 that inflation is not a blip and that it was baked in to the economy. Letter after letter from Mervyn King to the Chancellor has excused missing the inflation target as temporary and promised it would decline in the months ahead. Promises now shown to be demonstrably false.

Ladies and gentlemen, Guido presents the Great Inflation Swindle, we have just seen the second-biggest one-month increase on record and a record high in core CPI yet the Governor of the Bank of England has told us for 3 years inflation was a blip and that the real danger was deflation. It was a deliberate lie to excuse the most reckless monetary loosening since… well, actually monetary policy has been too loose globally since back to 1998 when Greenspan “saved the world” after Long Term Capital’s financial theory geeks had a close encounter of the reality kind. The loosening up of monetary policy to smooth the aftermath of that hedge fund collapse told financial risk takers to rack up the risk because central banks would step in if you got in to trouble. Everyone was “too big to fail”. Central bankers turned capitalism from a system of profit and loss into a system of private profits and socialised losses. Taxpayers had their chips put on the gambling table without even being asked. 

From 1998 to 2008 central bankers failed in their primary task of taking the punch-bowl away when the financial party gets too swinging, drunk on cheap credit and easy profits. In 2008 the solution when the excrement hit the air-conditioning, with interest rates already at rock bottom, was Quantitative Easing (QE). The excuses given for printing money on such a massive-scale were two-fold, to ward off  an imaginary “deflation” bogeyman and to provide an economic stimulus. Those of us who said this would inevitably result in inflation were shouted down. We now have inflation at almost double target and rising, the huge cost of the monetary stimulus has provided very little growth and undermined Cameron’s stated aim of “sound money“.

“Sound money” is not something that the Bank of England seems to be aiming for or even expecting. Guido has remarked on the Bank of England Pension trustees prescience before, their success is a little short of scandalous. If there was evidence of insider trading at a normal fund the investors would be in jail. Whilst Mervyn King’s Bank of England scaremongers about a deflation bogeyman his pension bets on the exact opposite – buying inflation protected securities on an amazing scale. Guido has discovered that Mervyn King’s pension is 94.7%* invested in index-linked, inflation protected securities, up from an already remarkably high 88.2% the year before.

This is the exact opposite of what you would do if you really feared deflation, in a deflationary environment fixed income securities rocket, out-performing index-linked securities. Mervyn King’s Bank of England pension pot profits from doing the exact opposite of what it should if the trustees believed the Governor’s pronouncements were credible.  This is no accident, Guido believes it is the deliberate policy of the Fed and the Bank of England, with the complicity of their political masters in the US Treasury and HM Treasury, to inflate their government debts away. Inflation is a pernicious form of taxation, it punishes the old and those who save and leads to a worse reckoning in the end. We are being deliberately swindled by the political elite.

*Just 22% of UK gilts are inflation-protected, the Bank of England pension fund’s skew towards expecting inflation is that pronounced.


219 Comments

  1. 1
    A full on English Cunt says:

    Pardon me for being thick, But is this what happens when you print billions and billions £s?

    Like

    • 3
      Up sh1t creek says:

      Andrew Sentence interview, two parter….

      Like

      • 197
        "Danny" Blanchflower follower of Keynes & Balls' guru says:

        Of course you are right Mr Fawkes. I’ve been quite open about this wherever I speak.

        Savers have to take a haircut by letting inflation rip.

        Debtors must be protected by keeping interest rates low.

        Like

      • 199
        "Danny Blanchflower follower of Keynes & Balls' guru says:

        Very perceptive of you Mr Fawkes but I’ve always been open about the need for inflation to erode debt.

        Savers are anti-social and debtors must be protected! Inflation does just the trick.

        Like

        • 208
          David Laws Lib Dem fiddler says:

          Good blog Guido, a view I have subscribed to on many occasions. People need ot start writing to their corrupt MPs to make them answer some of the questions. Too many people remain silent.

          Let’s hope King’s balls tune square and fester in the corners. Better still let’s hope the FSA investigate him. How can we make this happen??

          Like

        • 212
          low resolution fox says:

          In other news, the private sector had a 2-3% average payrise while the public sector had 4% inflation to deal with.

          Some would say.. this is a perfect scenario for young private sector workers without savings or pensions, of a right-of-centre disposition.

          For once, I salute thee BofE!

          Like

    • 9
      misterned says:

      Yes it kinda is.

      the paragraph in which it is stated,

      “Long Term Capital’s financial theory geeks had a close encounter of the reality kind. The loosening up of monetary policy to smooth the aftermath of that hedge fund collapse told financial risk takers to rack up the risk because central banks would step in if you got in to trouble. Everyone was “too big to fail”. Central bankers turned capitalism from a system of profit and loss into a system of private profits and socialised losses. Taxpayers had their chips put on the gambling table without even being asked. “

      Shows that this has not been a failure of capitalism. Capitalism was excluded from the boardrooms of the corporations when they became “too big to fail” and instead corporate welfare, or socialist corporatism, or Marxist Fascism took over the financial markets, turned them into a crap shoot and handed joe tax payer the bill.

      Privatising profits and socialising losses is the economy of Fascism.

      The only way to stop this is for everyone who has any debt to these corporations to refuse to pay it and see them collapse. The world economy would also collapse. But from the ashes, there may be hope that capital would be based on some sound money and capitalist rulesets once more, where those who take the risk also have to shoulder the burden of failure themselves and not pass it on to the taxpayer.

      However there is no real prospect of people working together for the greater good and bringing down an overtly corrupt, Fascistic corporate system. So the best any individual can do is try to get out of debt as fast as possible and never get into debt again.

      Like

      • 39
        Sean Fernyhough says:

        What absolute nonsense from beginning to end.

        Like

        • 55
          Disenfranchised of Buckingham says:

          No. Spot on analysis

          Like

        • 56
          Engineer says:

          It is quite correct to say that the privately-owned banks, instead of being allowed to fail when they became insolvent, were bailed out with taxpayers’ cash. If capitalist principles had been followed, the banks would have failed. Shareholders, bondholders and speculators would have lost their money, but not the taxpayer.

          Given that the retail sectors of those banks were generally sound, the only government intervention should have been temporary nationalisation of the retail sectors of those banks and guarantees of deposits. The ‘casino’ investment part of the banks should have been allowed to go down, and their failed boards of directors with them.

          Like

          • Anonymous says:

            +1

            Like

          • Anonymous says:

            Banks are too big to fail. If one bank is allowed to fail all banks will fail. This will destroy the country.

            Why do you want to protect the deposits and waste taxpayer money, if banks go bust the fools who put money in the banks also should be allowed to go bust.

            Like

          • Engineer says:

            Anonymous – Lehmanns was allowed to fail, and the world kept turning.

            Like

          • Anonymous says:

            Engineer says: June 2, 2011 at 1:21 pm

            If Lehmanns have been saved the mess we ended up will be less. Also Lehmann’s was just a casino bank ours are both casino and retail, they use retail funds to fund the casino’s.

            Like

          • Engineer says:

            “If Lehmanns had been saved the mess would have been less.”

            What planet do you inhabit, because it certainly isn’t this one.

            Like

          • Anonymous says:

            Engineer says: June 2, 2011 at 1:32 pm

            After Lehmanns went to the wall, Hedge Funds had a go at other banks. It took 100s of billions to stop the global meltdown.

            Engineer, I was on the plant called earth when this was happening? Where were you? If you have been on earth, you should have been high on some thing.

            Like

          • smoggie says:

            Engineer the guy is making a valid point. You are resorting to personal abuse like your sockpuppet mate.

            Like

          • Engineer says:

            Let’s remember the roots of the banking crisis.

            In the late 1990’s, bank regulation was reorganised by the incoming Labour Chancellor, creating a tri-partite system of Treasury, BoE and FSA, none of whom were quite sure what responsibilty lay with whom. Some of the banks took advantage, and the government was delighted with the tax revenue that resulted. They started to spend recklessly on public services, believing the good times would last for ever. As with all bubbles, they didn’t.

            Whom to blame? Some bankers, for sure – but also an inadequate regulatory system. Treasury ministers at the time must carry some of the blame, as must some of their advisers.

            I don’t buy “too big to fail”. I do buy “poorly regulated and poorly managed”. As a non-participant in all this, I deeply resent being made to pay for it.

            Like

          • Alan Greenspaz says:

            “Let’s remember the roots of the banking crisis. In the late 1990’s….”

            This is very, very funny.

            Like

        • 63
          Anonymous says:

          If interest rates go up, people and business will not be able to pay the banks, banks will go to the wall again and the tax payer has to bail out again.

          As the tax payer hasn’t got any money either, only option is to cut rates, possibility to zero.

          Like

          • Anonymous says:

            If Lehmanns have been saved the mess we ended up will be less. Also Lehmann’s was just a casino bank ours are both casino and retail, they use retail funds to fund the casino’s.

            ============

            Lehmans – American bank.

            So who were the casino banks in the UK?

            B&B – ah – retail mortgage bank
            NR – ah – retail mortgage bank
            Lloyds – ah – high street bank
            RBS – ah – high street bank.

            Common factor. Retail banks.

            Cause of problems. Mortgage lending and bloody customers not paying back their loans.

            Like

          • Engineer says:

            B&B – allowed to fail. Loans and deposits transferred to Santander.
            Lloyds – financially fine until the Maximum Imbecile intervened and merged them with (I forget whom).
            Northern Rock and RBS – not just retail banks. NR failed because of excessive investment in such financial instruments as Collateralised Debt Obligations.

            Like

          • Anon E Mouse says:

            Engineer @ 3:57pm

            Lloyds ‘merged’ with HBOS. I still don’t know who or what caused Sir Victor Blank & Eric Daniels to accept the demands of El Gordo…..

            Like

        • 68
          Prole says:

          Well ?

          Like

      • 66
        Up sh1t creek says:

        You gotta ask yourself one question……..

        Like

        • 89
          Anonymous says:

          They have already screwed us, they pay all the political parties, even UKIP. Just look at how much money they gave Osborne to run his office. When Labour wins the next election they will also support the banks. Even after all the bank messes noting changed, they do what they want.

          We have to accept that they are the masters and live with it.

          Like

          • misterned says:

            Or persuade 30% of the people to take all of their own money out of the banks and deliberately crash the entire system.

            Like

          • scratch and sniff says:

            you only need to remember one thing – all bankers are Hunts.

            if you ever get the chance – kill one

            Like

    • 14
      Nothing New Under the Sun says:

      Governments always inflate their way out of debt. Always have done, always will do.

      Like

      • 60
        Boudicca says:

        ‘Inflate away the debt’ was certainly the plan of the Moron from Kirkaldy, if (God forbid) he had managed to be re-elected.

        The Coalition is simply BlueLabour and is doing the same, but slightly more discreetly than Jonah would have managed.

        Like

        • 82
          Anonymous says:

          There is no choice. We have to let pound fall further and cut interest rate to zero and let inflation eat the debt. This is the only option left.

          Like

          • Engineer says:

            Rubbish. We can also take the responsible option of not accumulating more debt, then starting to pay it down. That will take longer, but will be the better long-term fix.

            Like

      • 92
        Postlethwaite says:

        ‘Governments always inflate their way out of debt.’

        Hope it works for grease,

        Hope it works for spain,

        Hope it works for iorland,

        Hope it works for potyougal, i’m fed up bailing other countries out

        Like

    • 88
      Tax needn't be taxing says:

      No more Bailouts:

      http://www.nomorebailouts.eu/No_More_Bailouts.html

      Like

      • 97
        Anonymous says:

        Even UKIP is funded by bankers and hedge fund owners.

        Like

        • 128
          Anonymous says:

          I am surprised to see UKIP supporters going quiet, when I said UKIP is funded by Hedge Funds and Bankers. I though you all will ended up denying.

          Like

    • 191

      Yes it is.

      No-one has ever doubted this. The proponents might claim that the before the inflation kicks in the ‘extra’ money might kickstart growth which exceeds the inflationary effect leaving everyone with more money which might be worth less, but has a net value in excess of that, each person would have without the ‘extra’ money. Of course, it’s a massive gamble which has always failed. It’s a bit like buying 200 billion lottery tickets.

      The insight on Mervin Kings side bet is fascinating and would explain such a reckless course of action.

      Like

    • 213
      Seriously worried says:

      You mean Obama’s wikileaked comments about Dave and wee Georgie Osbourne might have been right?

      Dave mate you need to seriously dump the focus group suggestions about how to be photographed, where to go on holiday etc, pull your finger out of your arse and sort yourself, your policies and the countries out.

      Too many ill thought out policies and U turns.

      Politics isn’t a game, it’s all our lives you’re playing with.

      Like

  2. 2
    Oy Vey says:

    So, whats the solution?

    Like

    • 7
      Up sh1t creek says:

      Like it or not, raise interest rates to at least 3%. They were dropped FAR too low in the first place by Gordon Brown and Mervyn King, and now the entire UK economy is paying for it.

      The feckless are being bailed out with cheap credit (including government), savers and pension pots are being robbed by the Bank of England and government, and the savers that normally spend in recessions are going on strike.

      Fact is simple, a normal recession has NOT taken place, so now good money is being used to prop up bad money turning good money into even more bad money, the result is the cr@p state of the UK economy.

      There needs to be a proper routing of all the bad money, stop the protecting of the feckless (including government).

      Like

      • 18
        misterned says:

        Increasing our interest rates will do nothing to prevent speculation on the energy markets, or the commodities markets or reduce VAT.

        That is where our inflation is coming from mostly.

        Like

        • 33
          AC1 says:

          Yes it will. Increasing interest rates will make using debt less attractive and it’s the growth of debt/credit that causes these spill overs into speculation.

          Like

          • misterned says:

            Who is using debt? The amount being lent at the moment is pitiful for an economy based on fractional reserve banking.

            Like

        • 34

          Correct. But rates must rise. Even if only 1%.

          Like

          • Anonymous says:

            If interest rates are raised the country will go bankrupt. Might be this is the way to get this lot out of the government.

            Like

    • 8
      Bled White Taxpayer says:

      Look after yourself. Invest in things that tend to maintain their value in inflationary times. Gold and silver work for me, others gamble on the markets.

      Like

      • 73
        Prole says:

        Gold and Silver are big bubble territory

        Like

        • 141
          Bled White Taxpayer says:

          Depends on your perspective. In my case, buying little and often since 1983 has seen my holdings far out-value (as at today’s prices) the sum of money I actually paid. There were even a few months when Gordon helped me out by crashing the gold market, so I could buy rather more than I had initially planned.

          But yes, it could all come crashing down. That’s my risk.

          By comparison, the endowment plan I paid into for nine years really was a poor investment, so I stopped it.

          Like

          • Chris Huhne's Lawyer says:

            For gold to truly come crashing down, then you’d need to see a large number of holders (including central banks) selling their gold and buying currency and government bonds. Anyone think this is likely right now?!?!?

            Yes once the crisis really happens and we have currency collapses, then you will want to exchange some of your Gold for assets that can deliver income – property, high yielding stocks perhaps. At some point when a new stable currencies are born, then gold will likely correct.

            Like

    • 11
      misterned says:

      Taxpayer and debtor revolt? Stop paying into the corrupt system, take all your money out of the banks and destroy the overtly corrupt system?

      I would take all my money out…..

      …..but I don’t have any.

      Like

    • 21
      AC1 says:

      End the potemkin part of the economy. i.e. Shut down a lot of the extortion funded sector.
      Lower taxes on wealth creating transfers (such as income taxes and NI, CGT, VAT, Stamp duty and Corporation taxes).
      Start taxing the things government creates such as Land rights (inferred rent), Patents and Copyrights (will raise vastly more than the above taxes).
      Tax bank balance sheets 1-2% to fund a deposit insurance scheme and stop bubbles. takeover b4nkrupt banks and zero-out the shareholders and bondholders.
      Make proper reserve requirements at banks.
      Hand out the IP & LVT as an equal citizens dividend.
      Bill each person equally for the cost of government.

      Like

      • 40
        lola says:

        Seconded – in spades, but fat chance. Turkeys don’t vote for Christmas. And boy do we have turkeys.

        Like

    • 157
      Anonymous says:

      There is no solution. The government bailed out the Banks. But the government is running a huge deficit and can’t afford the bailout, so has to borrow the bailout money from the, wait for it,….. the very same banks they are bailing out! The whole thing is a joke. It’s like the American economy. The US economy is fucked because both the government and consumer have spent years spending money they don’t have on things they don’t need. Who makes the crap they buy? Answer. China. Who lends the USA the money to spend on the crap made in China? Answer. China. And China only has money to lend to America because Americans are buying Chinese goods with Chinese money. Bugs Bunny has run off the cliff but hasn’t looked down yet.

      Like

      • 163
        misterned says:

        Bail out: The government steals from the tax-payer to give money to the banks which they then lend back to us taxpayers at interest.

        See also scam, fraud, rip-off.

        Like

  3. 4

    Excellent comment Guido.

    A more fundamental problem is the idea – basically socialist – that a central bank can guide the money supply of an economy, rather like old Soviet planners thought they could predict and control tractor production in the Ukraine.

    The sooner we return to genuine private banking, commodity-based currencies and the end of legal tender laws, the better. I am afraid that is some way off, though.

    Like

  4. 5
    Theres only so much you can sweep under the carpet says:

    Just remember the New labour mantra
    “Low interest rates are the Opium of the people’

    Ever since then, this state of affairs has been achieved by hook or by crook.

    The crash was inevitable.

    Like

  5. 6
    Blue Eyes says:

    The British government cannot “inflate away” its debt, because most of the government bonds are index linked.

    Like

    • 22
      Anonymous says:

      And watch inflation plummet in the new year as VAT increase and commodity spikes fall out of the annual comparison. QE 2 in 2012.

      Like

      • 218
        Chris Huhne's Lawyer says:

        And then watch it rise again as QE3 in the US sends commodity prices ballistic.

        Like

    • 42
      lola says:

      Depends on how you measure inflation and to which measure Gilts are indexed.

      Like

    • 53
      stun says:

      Not so. From the UK DMO: IL Gilts £250bn. Conventional Gilts £818bn. Excludes things like NS&I and foreign currency issuance though.

      Like

  6. 10
    Gordon Brown says:

    I’m good with numbers.

    Like

  7. 12
    Up sh1t creek says:

    There’s a new round of Quantitative Easing in the UK in all but name. Coalition keeping quiet about it.

    http://www.telegraph.co.uk/finance/economics/gilts/8550716/Banks-buy-bulk-of-39.8bn-of-new-gilts.html

    Like

  8. 13
    Anonymous says:

    Doesn’t having inflationbuilt into the system actually reduce the amount of money that we have to pay back?

    Like

    • 25
      AC1 says:

      You’re on a roll. You should invent a perpetual motion machine while you’re thinking this way.

      Like

      • 61
        Interest rates must go up ! says:

        You are very rude AC1 anon has taken some time out from his work planting magic money trees to post on this site and you are rude to him.

        Like

    • 41
      Engineer says:

      Perhaps in some circumstances, but it doesn’t help much while the debts are still increasing.

      Like

    • 79
      misterned says:

      Almost, it reduces the value, or worth, of what is paid back, but not the amount.

      100 pounds will always be 100 pounds. However it will not always purchase the same value or worth of products.

      Like

  9. 15
    Drop a Daisy cutter on the BBC says:

    13 years of Gordon Brown should be the headline. NEVER must socialists, especially gay jock ones be allowed to run England.

    Like

  10. 16
    Nu Attack Dog says:

    We’re McDoomed

    Like

  11. 17
    Drop a Daisy cutter on the BBC says:

    BBC news “There is an ongoing incident in Watford”

    Yes someone has signed off the dole and got a real job.

    Like

  12. 19
    opinion prole says:

    Surely not, politicans inflating away debt by debasing the currency? Whatever will they think of next?

    From where I sit the pound is already down 40% against the Yen from its 2008 peak and that means all our UK assets are worth a hell of a lot less than three years ago in terms of a hard currency. The pound will soon become a currency that nobody wants and will spiral down even more unless the coalition get a grip. Fat chance of that – they are after all waffling politicians, not businessmen or engineers who can do the hard sums and deliver the goods as promised.

    Like

    • 188
      Me, here says:

      Why can’t we have businessmen and engineers running this country, England, out of the eu, they would do a damn site better than the shysters in Wesminster now!

      Like

  13. 24
    Lev says:

    Great stuff Guido, and excellent work re: King’s pension – one of your best posts me thinks.

    Like

    • 38
      ssdb says:

      Agreed.

      +10 internets to Guido

      Like

      • 76
        Nu Attack Dog says:

        +1

        Like

      • 183
        Global Snazzer says:

        I must admit to getting half a chubby when I read the below…well put.

        “Central bankers turned capitalism from a system of profit and loss into a system of private profits and socialised losses. Taxpayers had their chips put on the gambling table without even being asked.”

        Like

    • 86
      Sir William Waad says:

      Nobody is a hypocrite with their OWN money.

      Like

  14. 26
    Cardinal Richelieu's mole says:

    A good description of QE (in the US context) is given @ http://www.creditwritedowns.com/2011/03/how-quantitative-easing-really-works.html and concludes: –

    So QE2 Is Equivalent to Issuing Treasury Bills. In actual fact, all QE2 does is drain the real economy of interest income by swapping an interest-bearing government liability for a non-interest bearing government liability. This decreases aggregate demand in the economy. So the real economy effects of QE are to slightly lower aggregate demand. This is offset by changing interest rate expectations, which alter private portfolio preferences, and lower risk premia, leading to credit growth, leverage and speculation, forces which should pump up the real economy. The Fed had intended to lower interest rates via the lowered risk premia. To date, the Fed has lowered risk premia. But this has also provided the tinder for speculation and leverage. Moreover, the Fed has also raised inflation expectations to boot, causing interest rates to rise and working at cross-purposes with the lowered risk premia. Thus, QE2 has only been successful insofar as it has increased business credit and raised asset prices. In my view, QE2 has been a bust as it adds volatility to the system and will have negative unintended consequences down the line.

    Like

  15. 28
    Penfold says:

    Inflation the secret ingredient to remove debt from your b/sheets.

    Wash away those irritating and fiddly debts with Inflation guaranteed to wash away those red bits.

    Like

    • 48

      But.. falling house prices with increasing interest payments?
      .. falling wages with increasing energy and food costs.
      Rising insurance and rising fuel prices and taxes.

      we have been here before. It didn’t end very well.

      Like

  16. 29
    Is Gordon in Watford today? says:

    A man in a Co-op bank in Watford is threatening to harm staff and himself. Bank is surrounded by police.

    Like

    • 32
      A full on English Cunt says:

      Maybe he has maxed out his credit cards and they wont give him anymore money?

      Like

    • 36
      AC1 says:

      Maybe it’s Gordon Brown and the coop has called in the 1nsolvent Labour Parties debt?

      Like

      • 50
        Co-Op. Unsuccessful for a very good reason says:

        Maybe it’s just a normal typical person who’s gone into a Co-Op and realised what an utter shower of shit work in them.

        Like

    • 85
      Sir William Waad says:

      I’m sure the Co-op Bank will deal with him ethically and insist that the police use Fairtrade bullets from sustainable sources.

      Like

  17. 30
    A full on English Cunt says:

    So we are being conned again by goverment, did they have any other choice?

    Like

    • 45
      And why not? says:

      Screw the creditors, default on the debt?

      Like

      • 99
        misterned says:

        Defaulting would be very painful. If we all defaulted, then the money supply would grind to a halt. There would be an enormous depression. many people would starve to death. We would have to go back to growing our own food and living a backwards lifestyle.

        However we would be free from the corporate Fascism which is the [central banking/tax collection] system. We would be in a post slavery-to-money world where we could create an honest system of trade, or money, which holds its value and frees mankind, instead of enslaving it.

        In simple terms, as soon as money is created, more money is owed, than was created.

        Like

        • 122

          It would include all the crony corporates too. Sadly big state results in big corporates, which are “too big fail.” Just look at this Southern Cross looting by pirate equity crooks. Capitalism is for the little people now. Same with huge indebted nations too, they are reliant on big banks. It would require a people led revolution to break this stranglehold now as all the politicians and political parties are financed by the “City.” Doesn’t matter who you vote for, you’ll get the same policies. US and UK are now fascist.

          Like

    • 103
      Postlethwaite says:

      Probably not, but which government are we talking about?

      Like

  18. 31
    Anonymous says:

    And other economists say different.

    Price rises are being driven by a contraction in supply while demand stays stable. Interest rate rises will only fix that by dampening demand through taking more money out of people’s pockets. It won’t fix the underlying cause, which will remedy itself through the market expanding supply through the price rising signals.

    There’s being an inflation hawk, and being dogmatically driven.

    Like

  19. 37
    Sky Babe says:

    Sky news’s sports presenter Georgie Thompson is fucking hot!
    At work:

    Not at work:

    Like

  20. 44
    the moneyshot says:

    your you SERIOUSLY saying merv king is STOKING INFLATION to keep his PENSION hunky -dory

    his PENSION might be saved but his REPUTATION would be in TATTERS

    Like

  21. 47
    'I beat the banks' - Andrew Jackson says:

    It is an uncommon fact that when private companies control the money supply they will require interest and boom and bust the economy to generate more debt that requires more borrowing with interest.

    Just imagine a country that prints its own money with no debt associated with it

    Trebles all round!

    Like

  22. 49
    Cazza says:

    Guido, I read your blog and usually agree with all your sentiments. It usually keeps me amused but on this occasion, I think you are plain wrong. I work in finance. Andrew Sentance has banged on about interest rate rises for months but from all the coverage I have seen he has only been concerned that the BOE will lose ‘credibility’ with the public if they failed to reduce inflation, but from all the coverage I have seen of his comments, not once, has he explained how taking money out of the economy by raising interest rates, will help the economy. Thousands of people will struggle even more with their mortgages, reposessions will rise, businesses will struggle more to meet finance costs, staff will be laid off etc etc. I think a successful economic policy tries to avoid that much pain. Yes inflation can be painful for some people, usually savers, but there are winners and losers in every economic decision. Believe me, low interest rates are not encouraging anyone to borrow at the moment. Some people overborrowed in the good times, encouraged by Jonah abolishing boom and bust but in my experience, those in financial difficulty now are in that position not because they have borrowed too much, but because their income has reduced/been lost due to the recession, and they are now struggling to service their debt

    Like

    • 59

      This is true.
      But are you advocating 0% Japanese style interest rates for evermore? Because the economy is a long from real growth.

      Like

      • 70
        Cazza says:

        No, I am not, but only until such time that the economy starts to recover properly. Interest rates are far too blunt an instrument to control inflation especially when most inflation is imported as it is now. Now if we had wage inflation and price inflation, then there may be a case for increasing interest rates to help control inflation

        Like

    • 72
      Interest rates must go up ! says:

      All that you forecast is the inevitable outcome of Gordon Browns Potemkin Economy. We are still brushing the consequences under the carpet. People will suffer thanks to Brown but at the moment we are pretending it isn’t there and hoping it will go away if we ignore it. Cuts , redundancies and inflation are the true legacy of Browns idiocy.

      Like

    • 91
      The tide has gone out says:

      I understand the argument, but what about the savers and the pensioners on a fixed income? What about all the people who didn’t buy into this stupidity, and didn’t take out stupidly high mortgages for a tiny piece of land and some baked mud?

      We punish the people who were right, and let the people who were wrong off scot free?

      Let the tide go out. The longer we prop the stupid up, the more the stupid believe they were right. Until we repeat the whole exercise.

      Like

      • 204
        scratch and sniff says:

        “We punish the people who were right, and let the people who were wrong off scot free?”

        have you only just realised this? It’s what always happens to the little people

        Like

    • 94
      Let the tide go out says:

      I understand the argument, but what about the savers and the pensioners on a fixed income? What about all the people who didn’t buy into this stupidity, and didn’t take out stupidly high m*rtgages for a tiny piece of land and some baked mud?

      We pun1sh the people who were right, and let the people who were wrong off sc*t free?

      Let the tide go out. The longer we prop the stupid up, the more the stupid believe they were right. Until we repeat the whole exercise.

      Like

    • 125
      Engineer says:

      Cazza, I fundamentally disagree with you. The problems we face are almost wholly down to too much debt, much of it accumulated over the past decade. Mortgages available on self-certification of income, lending five times income and lending 125% of property value were bound to end in tears, and the people taking such risk are likely to suffer. Too much cheap credit caused Ireland deep problems, and the UK was heading the same way.

      I am sick to the back teeth of working hard to pay off my debts, and then save only to be kicked in the teeth, robbed by inflation, and used as a cash-cow to bail out the financially feckless. If people borrow to the hilt, they take a risk that they may go bust if they cannot repay their debts.

      Inflation is evil. It punishes the prudent, and the most vulnerable, such as those living in retirement on fixed incomes. To punish them with cynical inflation to save the skins of the financially reckless is vile.

      Like

      • 130
        Gordon Brown says:

        I agree.

        Like

      • 139
        misterned says:

        Yes, but the current interest rates are not contributing to the inflation. At least not by much. More people were borrowing more money when interest rates where at 5% than they are now with interest rates at 0.5%

        Fewer people are borrowing than have done for many years, due to a combination of more responsible lending practices from the banks and there are many people who have been stung from borrowing too much and will not do so, or are unable to do so now.

        The current inflation is caused by international speculation on commodity prices, food prices and raw goods, oil prices and the VAT increase. It is not driven by high wage rise settlements pushing prices up or massive demand in the shops or from domestic businesses pushing prices up.

        If people were going out and borrowing more and more money and wages were rising and there was LOADs of money flooding this country, I would agree that interest rates would be an efficient way to control that sort of demand led inflation.

        An increase in interest rates now would be good for savers and some speculators, but overall would do more damage to the economy than good.

        Like

        • 215
          TONY BEN'S WILL says:

          in the old days the chancellors used to say they were putting up interest rates to stop the economy overheating ,well now we know what it’s like when the economy overheats world wide and over decades….BASTARDS

          Like

      • 153
        Cazza says:

        Engineer – too many myths have been perpetuated by those who think that self-certification, 5 times income and 125% mortgages caused the crash. They didn’t. I can tell you with 31 years experience in my trade that these were not the norm but they have been used as scapegoats. Most people, in my experience did not borrow ridiculous sums, a small number did and always will, but the vast majority didnt. Everyone needs to live somewhere and unless you want to pay someone else’s mortgage, then your only option is to buy a home of your own. Yes inflation is evil but so is punitive interest rates to those who borrowed prudently. Many people who have lost income have had to use their savings to finance their day to day expenses and pay off debt

        Like

        • 176
          Engineer says:

          Punitive interest rates? I was paying 12% – 16% on my mortgage in the 1980s. We haven’t had punitive interest rates for 20 years.

          Like

        • 207
          Errr..... says:

          Inflated house prices and the associated debt has to be one of biggest scams / stealth taxes that ever existed. If you’re fairly high up the ladder then you’re laughing otherwise you’re going to get financially fisted. Prices should be ~3 times the average wages ie. half what they’re currently at.

          Like

    • 143
      Maximus says:

      I have a very attractive lamppost I’d like you to see.

      Like

  23. 51

    “…private profits and socialised losses” Bang on the nail.

    Like

  24. 52

    Those interested in the illogic of all this might also like to cast their eyes over something that I discussed back on April 5th on my blog.

    “Mervyn King acts on food inflation but only for Bank of England staff!

    I am grateful to Bloomberg who have leaked a memo from Governor King to staff and my only concern is that it is dated April 1st! However in it Governor King promises to restrict rises in canteen prices whilst maintaining the quality of the cusine. Can you do the same for the rest of us please Governor? Also aren’t such subsidies supposed to have been stopped? Even before this the Financial Times concluded.

    The Old Lady is a generous and hearty cook

    With the way that the Bank of England pension fund invested in index-linked gilts some 3 years ago many may wonder if we are “in it together” as those responsible for defending us from inflation appear to be insulating themselves from it. If it is going to be as temporary as they claim then surely this is not necessary…..”

    Not quite what Mervyn is telling everyone else is it?

    Like

  25. 54
    Chris The Leatherman says:

    That is a really interesting piece of information. Mervyn King has devalued the UK currency and debased the pound, whilst providing himself with insurance, unavailable to most of us, against his own policies. It is quite obvious that the last government paniced with the downturn in the economic cycle and were woefully unprepared for it. The long term control for inflation has always been appropiate (highish) interest rates. Where is Milton Friedman when we need him ? All the economic problems and difficulties that were experienced getting the economy right in the eighties and nineties have been for nothing thanks to profligacy of New Labour.

    Like

  26. 57
    Tolly PointBee @tollypointbee says:

    Hi

    How will inflation affect Tuscan Villa owning Socialistas. What safety net do we have if fings go rong?

    Please follow me on twitter and show your support for Villa Owning Socialistas

    Like

  27. 58
    Daniel1979 says:

    Agreed except that the BoE and Fed’s masters are not the respective treasuries but other “banks”, and it is in their interests these policies are being made. Most people still don’t realise that the Fed is not a Government Department, but is a privately owned company.

    Like

  28. 69
    Raise interest rates now! says:

    Yes, this all resulted from control freak Brown setting up an unnecessary tri-partite “control” of financial regulation, which failed spectacularly. The IMF is on record as warning Brown as early as 2006, long before the crash, that the UK (government and people) was massively overborrowed, and that interest rates neeeded to rise. But of course Brown chose to ignore that. I believe interest rates from 2006 onwards were far too low for far too long, and prudent rises earlier could have corrected the unstable economy we now have, or at least subdued it. And printing money, which Brown did on a Herculean scale ALWAYS produces high inflation about 2 years later. NewLiebore were handed a stable economy in 1997 and completely trashed it. Totally agree with the comment above that the feckless are now being bailed out with cheap credit. It might have been a lot better if Northern Rock had been allowed to fail (beyond the £55000 individual investor level). That would have put a massive warning shot across the bows of other banks running those ridiculous, largely unregulated business models.

    Slightly off-topic, but see the shocking article about 11 year-old illiteracy in last night’s Evening Standard. And which government was in power for the whole of those 11 year-olds lives? NewLiebore! (Education, education, and education)

    Like

    • 87

      Interest rates in 2007 were 6%.

      Like

      • 120
        Raise interest rates now! says:

        Base rate was 5.5% for most of 2007, falling back to 5.25% in December 2007 after the IMF had pointed out the the economy was overheated and needed a rate RISE to correct it. Base rate has not been at 6% since February 2000.

        Like

        • 148
          misterned says:

          But there is no sign of the economy overheating now. Interest rates are NOT encouraging profligate spending now. The proof being that in spite of interest base rates being at 0.5% for about two years, the last months figures for borrowing shows a very very low level of lending to domestic consumers or domestic businesses.

          More people were borrowing more money when interest rates were about 5% than they are now that borrowing base rates are 10x cheaper.

          Although the personal loan I took out in 2005 has higher interest rates now than ever. The massive collapse in the cost of Borrowing base rates were not past on in any where near the same scale to borrowers. In many cases the cost of borrowing increased at the same time as base rates collapsed.

          Do you think that an increase in base rates would not be matched by an even bigger increase in domestic loan rates?

          Like

        • 160
          Anonymous Misogynist says:

          You could borrow £5K at a rate of 7.8% in 2007 so about 2% above base rate. If you want to borrow the same amount today you will have to pay 12.7% or over 12% above base rate.
          We are supposed to be in a period of low interest rates…ZIRP. Zero Interest Rate Period…
          To my mind this is another bank bail out by the back door.

          Like

          • misterned says:

            That is percentage points above base rate.

            If you look at how much more it is in absolute percent terms. 7.5 is about 50% above the 5% base rate whereas 12.5% is over 2000% above the current 0.5% base rate.

            Like

    • 155
      misterned says:

      The big error came in 2003, when the markets where collapsing because of huge corporate false accounting scandals. Interest rates were kept artificially low to keep people consuming.

      This was also to tempt people into taking on self-certification mortgages in the states. This was because of the way the mortgage backed assets were being sliced and diced and sold on to other finance companies and big banks “risk free”. The City of London had to compete in a global market where people in mega-banks in the US were making unimaginable fortunes from people signing bits of paper backed by a home and a promise to…. yadda yadda yadda, never mind the price will always go up and you can sell it on and make a fortune….

      OK a lot of people were stupid and gullible, BUT then these finance companies had a lot of brilliant and ruthless sales people who HAD to get people to sign up to mortgages. It did not matter that the people signing mortgages could not ever hope to afford the home, the finance company would have sold that piece of signed paper 10 times over by then to a big European bank.

      So these sales people would target people who had had it tough and promised them the earth. “You stack shelves at Wallmart? OK so you work hard and long hours. You also deserve a share in the economic success of America. You CAN have your million dollar house and pool and big SUV. You DESERVE it. sign here.”

      “I can’t afford a million dollar house”

      “We’ll give you 2 years at quarter cost and You can always easily refinance later, or you can sell up to make a profit. The way the market is going, you will be living in a 4 million dollar home in 5 years time…..sign here”

      “I’m not sure”

      “Can you see your friends enjoying their luxurious home, entertaining guests by the pool, sipping cocktails in the Jaccuzzi spa, this week, watching the big game on their 100 inch HD super flat screen TV, and then see them coming to your one bedroom flat next week to watch your 10 year old TV? Imagine how you would feel, coming home from work in your brand new SUV to the admiring glances of your new, better neighbours, coming in to your new home, with a games room and a home cinema and a pool. Relaxing knowing that deep down, you know you really deserve it? How good will that feel?….. sign here!”

      It wasn’t just banks recklessly gambling on the markets. It was much worse than that. It was deliberate and wilful fraud on a massive scale. knowingly creating and selling worthless bits of paper, supposedly backed by mortgages, as being safe investments.

      These poor Wallmart employees did not know that in five years they would be having 3 different finance companies who claimed to own that mortgage foreclosing on them and the Federal Reserve having to guarantee trillions of dollars in almost complete secret to the European banks to stop those banks from collapsing the American economy.

      Like

  29. 75
    Bob says:

    Look, the BoE is not there as some sort of patriotic institution that will do the right thing by the British people or, for Britain. It is there to whipsaw the people back and fore to squeeze as many spondulahs out of you as it can and give them to its criminal friends at the Stock Exchange. If you want to make a difference – instead of intellectually masturbating each other with witticisms about how the system is corrupt, yada yada – stop using the system. You don’t need all this material shit anyway they have conned you into thinking your penis will be smaller without it…

    Like

    • 134
      Witty man with too many fings and a small penis says:

      You are clearly a person with far too much money as only someone with money would say this.

      Which system shall we be using? Please tell us mere witty mortals, oh great one.

      Like

      • 211
        Bob says:

        If I did have too much money I would give it away.

        Which system shall we be using? Hmm, good question, It sounds a bit wishy washy and the red meat eaters amongst us would definitely not be satisfied but, if we could rebuild the system so that economics were based on the well being of our communities and happiness of people as opposed to growth and profit. Sadly, not an original idea I know. Damn, I think I need to spend the next few years working out the details.

        You have ruthlessly thrust greatness upon me and claimed a title of limited humble wittiness for you and yours, I’m not sure I can handle that however, I will try my best. I’m just sorry you think so, because of humour (I think it was humour) that was too aggressive.

        And don’t worry about your small penis, you can have some of mine as I have too much.

        Like

        • 214
          Witty man with too many fings and a small penis says says:

          No actually I was taking the piss out of your stupidity. I wouldn’t trust you with a carton of milk.

          UR such a knob jockey.

          Like

  30. 77
    Sir William Waad says:

    I’ve said it before. I’ll say it again. It is necessary for us to have high inflation in order to cheat all the people who have lent us money – including ourselves.

    So our Government makes pious expressions of penitence and claims to be cutting is expenditure, without doing anything of the kind. Our bond rates stay low, foreigners are willing to lend until, one day, we shout “Aha! Gotcha!”

    Like

  31. 83
    Tolly PointBee @tollypointbee says:

    The Chinks think they are clever stockpiling all those $$$$$$$$. Well we need to infdlate em away before they buy up all our public utilities.

    When Italæia quits the Eiro my Tuscan Villa will be lirterally worth gazzilions of Lira. YIKES

    Like

    • 95
      Mad Hattie Harman's curiously cavernous front bottom says:

      They are not ‘Chinks’, they are Chinese. And even though there are more than a billion of them, they’re an ethnic minority and therefore they are morally and socially superior to Western imperialists.

      PS: My country retreat in Suffolk is better than your country retreat in Tuscany. Bitch.

      Like

  32. 90
    Mike Rouse says:

    What is the “worse reckoning in the end” for high inflation? I genuinely don’t know what happens and how that affects me as an average Joe …

    Like

  33. 92
    gurney slade says:

    Basic economics. Printing money causes inflation – any schoolboy knows that. The Bank of England have always been incompetent but keep a really good cellar which, I think, influences their decisions.

    Like

    • 133
      Anonymous says:

      Is that where Gordon found the gold?

      Like

      • 139
        Gordon Goldien-Brown says:

        Hush now. I am working through my kickbacks from my clients (the purchasers of the cut-price gold).

        Actually all jesting aside, who the f*** did buy the gold?

        Like

        • 205
          Cutter says:

          The Russians and the Chinese. There have been plenty of news articles about it recently.

          They are also tooling up pretty heavily.

          Hmm. Buying gold and guns. Do you think they know something we don’t?

          Like

    • 169
      misterned says:

      But all money is ultimately created out of thin air now. None of it is backed by anything of value and most of it is electronic fields in a database.

      It has got to the point where the pound in your pocket is not money, but only represents an equivalent pound which was a digit in a database. It is then converted to “paper money or coins” when you take it out of a bank, and then converted back into it when deposited back in a bank. When it gets too old, it is taken away and burned, but the digit in the database is not deleted.

      Once the cashless society arrives, nobody will ever be in actual possession of their own money anymore. There will effectively not be any money at all, and only electronic credits.

      Anyone falling foul of that system would have to resort to bartering to survive.

      Like

      • 181
        Anonymous says:

        All human constructs – laws, politics, society – are ultimately created out of nothing, if that’s the way you want to look at it.

        Like

  34. 96
    A full on English Cunt says:

    Call me thick but, Would not it just be easier to pay off the debt?

    Like

    • 102
      Anon says:

      Or default on it.

      Like

      • 104
        A full on English Cunt says:

        And what would be the effect of that?

        Like

        • 109
          Anon says:

          Dunno. It seemed to work for Russia.

          Like

        • 137
          smoggie says:

          The effect would be that the next time we need to borrow money the rates will be astronomical. Like a bad driver always making insurance claims – the risk is reflected in the price – the premiums.

          Like

        • 171
          misterned says:

          Iceland had a referendum and democratically voted to default. Their economy is improving fast, but the global banking system has yet to attack Iceland for being so democratic.

          Like

    • 115
      Iam Skint says:

      Just send a note: “There’s no money left”.

      Like

  35. 98

    For every £1 earned by a council worker 64p is spent in the local economy.
    So only public sector workers spend where they live and work? What a feeble argument. {she’s used ‘progressive three times and false economy four times already.}

    R2..on now.

    Like

    • 105
      A full on English Cunt says:

      And the other 36p is spent on tax.

      Like

    • 107
      Anon says:

      Who’s on?

      Every £1 earned by a council worker came from the evil parasite private sector. 64p of each pound is then returned by the generous public sector to the private sector.

      Socialist wealth-creation in action, Comrades.

      Like

      • 114
        AC1 says:

        And the way that tax is raised on incomes causes far more than 1 pounds worth of economic harm.

        Like

    • 121
      Steve Miliband says:

      That £1 cost taxpayers £10

      Like

  36. 111
    The Spanish Gardener says:

    Anyone got a use for a soiled Spanish cucumber?

    Like

  37. 113
    Cazza says:

    One other thing. If Guido is right and Mervyn’s pension is in index linked securities rather than fixed interest, it is possible that he has no control over that pension. I have many clients (I am in finance) who for regulatory reasons, cannot directly choose the exact asset into which their pension is invested. They can for example choose a property fund, but they cannot choose which properties are invested in, the decisons have to be left to a fund manager. Guido, I think you have overstepped the mark on this one and assumed too much

    Like

    • 150
      Maximus says:

      Is this how you make your commission?

      Like

      • 166
        Cazza says:

        Giving good advice to long standing valued clients is my business. I am sure you are paid somehow unless of course you are of independent means, in which case lucky you

        Like

  38. 116
    Gordon Brown says:

    No need to thank me, My moral compass guided me.

    Like

  39. 118
    Drop a Daisy cutter on the BBC says:

    So why is Nokia on the way out? Could it be that the number of Nokia’s ordered by the Government has dropped for some reason? What could have happened since last year to reduce the number of Nokia phones?

    http://www.dailymail.co.uk/sciencetech/article-1392976/Nokia-close-losing-mobile-phone-crown-Apple-17-5-share-slump.html

    Like

    • 172
      misterned says:

      Well that and the fact that Samsung and htc and LG are now making far better phones than either Nokia or Apple. The galaxy S II beats the crap out of the iPhone 4 on almost all fronts. Bigger screen, faster 1.2gig dual core processor, double the RAM, better cameras front and back, full HD 1080p video recording, open and accessible OS and it takes memory cards. The only way the iPhone beats it is in the number of apps available, but the vast majority of those are shite, and the iPhone 4’s screen is higher res, but in daily use the Super AMOLED screen of the Galaxy S II is every bit as good.

      OK the iPhone 5 is rumoured to be good, but the Samsung Galaxy SII already has everything that is rumoured for the iPhone 5 matched. No doubt a Galaxy III will be under development ready to kick Apple’s ass whenever they finally get round to releasing the iPhone 5.

      Nokia are not competing at the top end anymore at all.

      Like

  40. 124
    Andrew Efiong says:

    Well said, from start to finish. Monetary policy has been too loose… so the answer has been even looser monetary policy according to Mervyn King.

    Anyone holding savings in British Pounds is a turkey. Time to think about moving it to Switzerland or Singapore, where hard work and hard currency go hand in hand.

    Like

  41. 127
    Blue Labour Dave OUT OUT OUT says:

    Final proof if any were needed that David Cameron is at the helm of Continuity Blue Labour.

    All that has happened since the election is that the baton has been passed from Red Labour to Blue Labour – no change of course at all.

    Cameron has alot to answer for – & will.

    He knows the real solution:

    CUT TAXES

    CUT THE SIZE OF THE STATE

    CUT OVERSEAS AID

    CUT MILITARY INTERVENTION IN VANITY WARS

    CUT PAYMENTS TO THE EU

    CUT THE BANKS OFF FROM TAXPAYER WELFARE.

    Any real Tories left in the house – apart from the 30 who voted for the Reckless Amendment?

    Sickening, truly sickening & I want my vote back Cameron.

    Like

    • 138
      annette curton says:

      Remember Mr C’s infamy… quote: “I am the heir to Blair”.

      Like

    • 142
      Red Torism must die says:

      +1

      Like

    • 146
      One Party State says:

      But you have a choice, you voted in a real democracy!

      Like

    • 149
      The Lib-Lab-Con says:

      Roll up roll up people, see if you can guess under which shell the pëa has been placed!

      Like

    • 151
      Maximus says:

      Cameron now part of the problem, not part of the solution.

      Like

    • 173
      misterned says:

      ID cards?
      the Children’s database AKA pedofiles catalogue?
      The over-intrusive state has been rolled back somewhat. So credit where credit is due.

      Although I agree that there needs to be cuts to taxes and to foreign aid and we need a binding referendum on EU membership.

      Like

  42. 129

    Its not just Merv that gets an inflation linked treasure chest. Its all the higher ups at the Bankrupt of England. Merv’s primary duty to is ensure the financial stability of his banking mates. Everything to Merv and his chums is “unexpected.” Didn’t a former Tory minister visit him and tell him years before that Northern Rock was a Ponzi and would collapse? Merv politely informed her she knew nothing about banking. I’ve absolutely no doubt at all that the BoE would have sat back and allowed the boards to loot and bust their own banks as much as the FSA did. Apart from a few (sacrificial) big names, like Fred the Bed, or the HBOS idiot Hornby, no one has been fired or better still, sent to jail. And the sacrificial lambs were amply rewarded for taking the fall.

    Like

  43. 131
    Anonymous says:

    Ill informed, regurgitated drivel from start to finish. Stick to political tittle-tattle Guido, this stuff is just embarrassing.

    Like

  44. 135
    Gordon Brown says:

    If Mr King is retiring soon, I would like to put myself forward for the jobbie

    Like

  45. 136
    Sir William Waad says:

    Merv’s cartoon cousin tries to help….

    Like

  46. 144
    Sir William Waad says:

    Completely off-topic, but it’s interesting to see that the horrible suffering caused by E coli in Germany was spread by ‘organic’ vegetables. (Silly phrase: all food is organic, except salt). The moral seems to be only to eat vegetables that have been hygienically grown, rather than ‘organic’ cucumbers that have been bedded in cowshit.

    Remember, organic food is that which is produced using only impure chemicals.

    Like

  47. 158
    Frances Coppola says:

    Good blog, Guido, and a lot of it spot-on. However, I would argue with you about interest rates.

    Interest rates to unsecured borrowers are currently sky-high, having rocketed since the financial crisis. Mortgage rates are still low, and we are told that that is because the base rate is low, but I doubt it. I think it is because the housing market is still overvalued, so the value of collateral is high. If house prices fall significantly (as Morgan Stanley predicts), mortgage rates will shoot up irrespective of what is done with the base rate. Business finance is expensive and not easy to obtain – Project Merlin has had little effect. So “feckless borrowers” are not benefiting from low interest rates. Far from it.

    On the savings side, savings rates are currently below inflation (I checked this morning). Admittedly Libor is rising a bit because of the Greek disaster, but it is still below 1%, and as I said above, unsecured lending rates are sky-high. So for financial institutions to be paying less than inflation on savings is disgraceful. We would all do better to remove our savings and stuff them under the mattress. Maybe then the banks would realise that they have no right to our money and need to give us reasonable incentives to lend it to them.

    The base rate only governs interbank lending rates. Banks are free to set whatever customer lending and borrowing rates the market will bear, irrespective of the base rate. They are choosing to set very low savings rates and high borrowing rates in order to recapitalise their balance sheets and maintain their RoE in the face of higher capital requirements. And for some reason we are letting them off the hook and blaming the low base rate for what is actually blatant profiteering at the expense of both savers and borrowers. Way, way off beam.

    Like

  48. 159
    gildedtumbril says:

    So, what do we call the mervyn kings? Fiscal nimbys, or fimbys? We are all being shafted,screwed, robbed blind, nicht varum?
    I understood this planet is called Earth.Is it to be renamed planet Rothschild?

    Like

  49. 167
    JP Floru says:

    “BOE in danger of losing its credibility on inflation” must be The Understatement of the Year.
    What credibility?

    Like

  50. 168
    bryan gaggs says:

    It was a mistake by Gordon Brown to switch the BOE target away from RPI.

    RPI-Inflation was consistently higher than target after the switch.

    Therefore Interest rates would have been much higher if the old target was maintained – Just look up the stats on the ONS site.

    Like

  51. 174
    Ak says:

    Guido hasn’t studied economics and probably doesn’t have a degree.

    Like

    • 177
      Engineer says:

      Many of those who did study economics seem to get it wrong with depressing regularity. People who studied economics got us into this mess. Perhaps it’s time for a bit of straightforward common sense.

      Like

  52. 184
    Anonymous says:

    what have cucumbers covered in manure got to do with interest rates or inflation or national debt – usa has big debts , nobody says they have to borrow from communist china

    Like

  53. 185
    ratbag says:

    Guido will appreciate as a monetarist that inflation is not possible without a growth in monetary aggregates. We are experiencing am increase in SOME prices (notably commodities) not ALL prices (inflation). This acts in a similar fashion to a fiscal tightening (and we’ve got one of those going on, too).
    Back to economics 1.01
    Rates are going nowhere. Higher rates have no impact on global commodity prices

    Like

  54. 186
    D-Fault says:

    Argentina did default on its public debt after the 2001 crisis – current growth rate around 7-8%. Britain, on the other hand, could take the same extreme measures except for the fact there is nothing else to fall back on to drive a sustained recovery (commodities, expoorts, that sort of thing) because of its over-dependence on the parasitic financial services sector.

    Like

  55. 187
    Gideon Osborne says:

    Me, I haven’t got a fucking clue, mate!

    Like

  56. 189

    OT but the BBC Trust is consulting on news..

    http://www.bbc.co.uk/bbctrust/consult/index.shtml

    I will be askthing them for more progretheth newth.

    Like

  57. 190
    Checkout Assistant says:

    ‘Labour’, Cameron and Clegg’s good cop act to the bad cop of the Tory right and their friends in the media won’t fool people forever. The tactic of buying off the proletariat with ‘public sector jobs’ and ‘benefits’ whilst the bankers and holders of capital continue unabated will produce its day of reckoning. I wonder when the establishment ‘left’ Guardian will start telling us about events on the ground in Greece…

    Like

  58. 192

    Fractional deposits mean than money has not value anyway. If £1 is deposited in a bank, well over a £million pound is loaned by the banking system, making that original pound worth less than 0.00001p. This process is repeated millions of times say, compounding the worthlessness of every pound in the economy each time it happens.

    Sterling hasn’t been worth anything for decades. Anyone who has saved some of it is a mug, who has thrown away their possessions and labour for a few shiny baubles. Fuck’em.

    The rest of us need currency that is immutable and cannot be multiplied by fractional deposits or quantitative easing. A currently that governments and banks can have no control over. A finite currency which becomes worth 10 times as much if there is 10 times as much demand. Such a currency would reflect the rarity and supply and demand values of the products and labour it is meant to be represent. This is the only way to have security in saving, and scarcity of finance which reflects scarcity of resource.

    Simple common sense.

    Like

  59. 193
    Gooey Blob says:

    Could not agree more Guido. The MPC has about as much credibility as FIFA these days, inflation has been over 5% for months (let’s stop quoting that useless CPI figure as “inflation”, RPI is what matters) yet the BoE sit on their idle backsides and vote to do nothing while people’s spending power is eroded.

    A small increase in rates now would bolster sterling against the dollar and push down imported inflation. This would ease pressures on UK consumers and boost the economy.

    Like

  60. 194
    Handycock, No1 Trougher in Parliament says:

    I don’t know why you have just woken up to ‘ the public being swindled by the political elite’ Mr Fawkes. I have been doing it for years.

    Like

  61. 196

    Fractional deposits mean than money has not value anyway. If £1 is deposited in a bank, well over a £million pound is loaned by the banking system, making that original pound worth less than 0.00001p. This process is repeated millions of times say, compounding the worthlessness of every pound in the economy each time it happens.

    Sterling hasn’t been worth anything for decades. Anyone who has saved some of it is a mug, who has thrown away their possessions and labour for a few shiny baubles.

    The rest of us need currency that is immutable and cannot be multiplied by fractional deposits or quantitative easing. A currently that governments and banks can have no control over. A finite currency which becomes worth 10 times as much if there is 10 times as much demand. Such a currency would reflect the rarity and supply and demand values of the products and labour it is meant to be represent. This is the only way to have security in saving, and scarcity of finance which reflects scarcity of resource.

    Simple common sense.

    Like

  62. 200
    Anonymous says:

    “it punishes the old and those who save”

    So you’re just concerned about others. Bless.

    Like

  63. 209
    Cazza says:

    To Engineer. I have had a mortgagê since 1983 so I know only too well that interest rates have been much higher than now

    Like

  64. 210
    Anonymous says:

    At the beginning of this year the PM dropped a bit of a Gaff, visiting Qatar in the midst of the “Arab Spring” in Egypt and Lybia. The reason for his visit was to help off-load the Tax Payers stake in the UK’s failed banks to the Qatar Royal Family.

    At the end of 2009, the Qatar Islamic Bank QIB (Major shareholder, the Qatar Royal Family) became the only bank in Qatar to hold an Islamic Banking Licence. All other licences were withdrawn, meaning that QIB is now the only bank that can supply Sharia compliant banking in Qatar.

    Like


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Find out more about PLMR AD-MS


A ‘senior Conservative party official’ passes judgement on Theresa May:

“She is boring. A technocrat. She is Philip Hammond with a fanny. Not interesting, but rendered interesting by circumstance. And that circumstance is that she is a woman. And in an age when the Prime Minister gets it in the neck for refusing to wear a fucking T-shirt that says he is a feminist, that is a rocket boost right underneath you.”



Left on Left says:

The lefties are attacking because the panellist is a millionaire and lives in a London home worth upwards of two million. Someone had best tell them he’s called Ed Miliband.


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