Saturday, Mar 20, 2010
Ask Greenspan for comments
The Independent: Ex-Governor George says Bank deliberately fuelled consumer boom
"We knew that we were having to stimulate consumer spending. We knew we had pushed it up to levels which couldn't possibly be sustained into the medium and long term. But for the time being, if we had not done that, the UK economy would have gone into recession just as the United States did."
He said he was "very conscious" that stimulating consumer demand could give rise to problems in the future. "My legacy to the MPC, if you like, has been 'sort that out'," he said.
Posted by sneaker @ 10:13 AM (1339 views) Add Comment
8 Comments
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1. house said...
Hi Sneaker, the link provided does not work. Any suggestions.
2. taffee said...
and gordon brown must have been behind it
http://www.independent.co.uk/news/business/news/exgovernor-george-says-bank-deliberately-fuelled-consumer-boom-441160.html
Ex-Governor George says Bank deliberately fuelled consumer boom
By Jane Padgham
Wednesday, 21 March 2007
The Bank of England deliberately stoked the consumer boom that has led to record house prices and personal debt in order to avert a recession, the former Bank Governor Eddie George admitted yesterday.
Lord George said he and his colleagues on the Monetary Policy Committee "did not have much of a choice" as they battled to prevent the UK being dragged into a worldwide economic slump by slashing interest rates. And he said his legacy to the current MPC was to "sort out" the problems he had caused.
Lord George, who headed the Bank for a decade from 1993, revealed to MPs on the Treasury Select Committee that he knew the approach was not sustainable. "In the environment of global economic weakness at the beginning of this decade... external demand was declining and related to that, business investment was declining," he said. "We only had two alternative ways of sustaining demand and keeping the economy moving forward - one was public spending and the other was consumption.
"We knew that we were having to stimulate consumer spending. We knew we had pushed it up to levels which couldn't possibly be sustained into the medium and long term. But for the time being, if we had not done that, the UK economy would have gone into recession just as the United States did."
He said he was "very conscious" that stimulating consumer demand could give rise to problems in the future. "My legacy to the MPC, if you like, has been 'sort that out'," he said. Under Lord George's governorship, rates were slashed from 6 per cent in 2001 to 3.5 per cent in 2003, pushing house price inflation above 25 per cent and high street spending growth to its highest since the late-Eighties boom.
In a wide-ranging discussion on the first 10 years of the MPC, Lord George also rejected suggestions that the MPC should target specific concerns such as soaring house prices, arguing that it was vital to take the broader picture of the economy.
Meanwhile, Kate Barker, a current MPC member, said in a speech last night that interest rate changes might become more frequent as the committee tackles volatile energy prices, rising inflation expectations and increasing pricing power. "This is a different kind of uncertainty from worries about demand which have been more usual during my time on the MPC, and I suggest that this may prompt a change in observed behaviour towards more frequent interest rate changes," she told the CBI North East dinner.
Saturday, March 20, 2010 10:09AM
3. Ralph Mugrave said...
To judge by the Independent article, I am 99% certain that Lord George does not understand economics ( a shortcoming he has in common with Bernanke). It would be nice to read Lord George's actual statement to the Treasury Select Committee. I spent ten minutes trying to get access to this on the interenet. But the govenment machine, as one would expect, makes this as difficult as possible.
Anyone got a link where we can read what Eddie George actually said?
4. mark wadsworth said...
That admission is years old, and Eddie George has since died, but it can't do any harm to remind people that this was all deliberate.
5. Christhpc said...
Mark, I was going to say! I know the Independent's coverage is patchy occasionally, but :D
I remember the article, was that really three years ago... Just before the crash wasn't it.
6. paul said...
The admission may be years old, but its definitely worth repeating. It exposes the lie that the credit crunch was an unavoidable 'act of god' and it invalidates the much-publicised argument that the credit boom and crunch took the Bank of England by surprise.
The media really should be dragging the Bank of England over the cols for the credit boom and bust it created. but all we have instead is a pliant and fawning media that seems happy to 'sign up' (Edmund Conway's words) to scaring away deflation with quantitative easing for the Bank of England.
7. iguana said...
When rumours of these comments to the Treasury Sub Committee first circulated it took a deal of effort by some on this site to get the transcript. This was obtained on the day and posted here. The brazen admissions were 'gob smacking', but despite the appalled reaction it got here, there was hardly a ripple elsewhere. Anyone interested in seeing just how cynically 'we' and others are manipulated, have a look at the Treasury Sub committee report on the first ten years of the MPC.
It seems that we are indeed mushrooms.
8. paul said...
I remember that happening iguana and I was indeed shocked. I was also appalled at the muted indifference the press showed towards it - if we had a free press this would not have escaped public scrutiny.