Thursday, Aug 05, 2010
Deal or no deal
Reuters: Osborne says no deal on rates with Bank
The government has not stitched up any deal with the Bank of England to keep interest rates low but thinks the best way to stimulate the economy is through monetary policy, Chancellor George Osborne told Reuters. Some analysts have speculated that King has done a deal with the new coalition government, which came into power in May, to cushion the economy while it gets on with cutting the record budget deficit. "There is no tacit agreement at all. He is absolutely independent, as is his (Monetary Policy) Committee," Osborne said. "I have always believed that the greatest stimulating effect you can have in the economy is a monetary one not a fiscal one and the way to keep rates for longer...is by making sure fiscal policy is supporting and in this case means dealing with the budget deficit."
10 Comments
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1. paul said...
If they are completely independent then how come the interest rate decision in November 2008(?) was announced in Parliament by Gordon Brown the day before the MPC met?
How come Ed Balls always had a track record of announcing interest rate cuts before the Bank of England? I think even Alistair Darling did this once on TV!
No sorry, the independence has always been a sham and that's why we are in the mess we're in.
2. fallingbuzzard said...
Groupthink can be completely independent!
3. Stevie Dee said...
The words monkey and organ grinder come to mind!
4. bidin'matime said...
Having sold to rent, we have for the last year or so been well out of pocket as a result of government / BoE policy of low rates. But there are two compensating factors –
1. The economy is on life support and a complete collapse would jeopardise our business and so our income. Even if we are still out of pocket a bit, at least we don’t have to ‘head for the hills’ to avoid mobs of hungry, homeless people…
2. Most of our cash is to buy us a house and the inflation we are seeing is not house price inflation. Along with government cutbacks, the impact of higher consumer prices will help to squeeze the budgets of home owners, making it harder for them to pay their mortgages, so decreasing the demand for upsizing and increasing the number of repossessions. This will ultimately bring house prices down in cash terms.
In the meantime, we rent a very nice house that has fallen in value by much, much more than we’ve lost interest. So on balance, I’d rather be treading water, waiting for house prices to fall, than swimming in shark infested waters…
5. mr g said...
No need to be sorry Paul.
Anyone with a modicum of intelligence can see through the smoke and mirrors, the point is, what can we do about it?
6. Crunchy said...
Facism rules the day.
What deficit? Oh, that one!
Bankers first.
Benito Mussolini would be proud.
7. Crunchy said...
1. paul said...'No sorry, the independence has always been a sham and that's why we are in the mess we're in.'
This form of BOE independence is worse than the original. At least their was honesty amongst thieves back then.
8. paul said...
I just posted my comment on their site. Hehe.
purloins problem
9. Mr Cobblepot said...
To our cries of inflation "Its behind you", they reply "Oh no it isn't", "Oh yes it is" we scream, but to no avail
To our cries of "What about the good people who saved and had nothing to do with this mess", they reply "Cant hear you"
Have George and Merv done a deal? I think that can only be answered in a way that reflects this entire pantomime "Oh yes they have!!!"
10. easybetman said...
I takes a long time to build up reputation and a short while to ruin it. Doesn't BoE knows that ?