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October 19, 2016



"she has the means to do so" obviously. Talk is for their mass voter audience. Who's fault is all this? Question asked and answered..

gastro george

Isn't it just yet another short-term political manoeuvre by the Tories - to try to blame somebody else for the state of the economy?

Ralph Musgrave

Gastro George, You hit the nail on the head.


My very long post appears to have gone missing?

The truth is the opposite of Chris's conclusion.


Independent = Unaccountable institutions.

World: IMF, World Bank, ISDS.
Europe: Bundesbank, ECJ, Brussels.
UK: BoE - Independent Central Bank.

The public can remove politicians, but not these, national/regional/international institutions.

William Hague made criticisms of QE.
But politicians have no power to prevent the BoE implementing policy through QE, without removing the independence of the BoE.

Control of the economy has been transferred to independent (unaccountable, unresponsive and remote institutions) with disastrous consequences.

The neo-liberal conscientious is set in international treaties and institutions beyond democratic control.


Please address what an 'independent' regulatory agency can do to help basic savers, real people's thrift, to be paid higher earnings? Did you miss this policy objective which is at least not tone-deaf about society's interest in prudent people saving for precautionary or other reasons.

I do not know if by-rule depository institutions could be ordered to pay more by the central bank (and lower fees, so backdoor offsets arent simply done to avoid the policy's purposes) but that woukd be one clear, direct way to do that while signaling that government actually cares about the far larger number of people in society who do need to practice basic thrift, when they are able. It is ok to signal that your govt cares about this, and indeed will do something to make sure that privileged institutions do not take advantage or gain by penalizing this basic thrift. What indeed does the public's law say about the authority to effect such a thrift-support policy, is the central bank independent and can do this policy anyway, whether there is public law authorization or not?

So independence is a reason to use theoretics about money, savings and Investment so it can remain tone deaf?

My idea of independence would have a central bank leader publicly speaking out about the lack of a proper public policy about thrift (perhaps other matters). But that takes some moral courage to speak out. Tone deafness, cloaked in theoretic leger de main, well, that is easier isnt it.


@ Aragon: the government DOES have the power to stop QE and raise rates. A big relaxation of fiscal policy would reflate the economy sufficiently to allow QE to end and rates to rise.
@ JF - I suspect you might have a point, that a long period of nugatory real rates would diminish the culture of thrift. But low real rates are not the fault of the Bank. They're the result of secular stagnation and an inadequate government response thereto - namely too tight a fiscal policy.


Who is in charge and how do they co-ordinate?

What if the BoE like the IMF regards the fiscal multiplier to be less than one, they may still think the economy requires QE.

Given multi-value, multi-attribute, stimulate/ inhibit (in varying degrees) it could get complex.

The Government and the Bank may be Over/Under stimulating/inhibiting, or even acting (dynamically) against each other as they have a different view of the economy, or the economy displays: lags, hysteresis, overshoots, uncertainty etc.


Carney should go further and tell the public that the only constraint on spending is real resources. The monetary policy game is not delivering, for the fairly simple reason that monetary policy is just a smokescreen and fiscal policy is what delivers the outcome - interest rates go up, government cuts back on spending, interest rates go down government increases spending.

But we now know we can do all that without interest rates going up and down. We can just leave base rates at zero and run the economy in a functional finance manner - largely via the auto stabilisers but with decent government investment spending.


It's true that inflation has been below target since 2014. Setting aside questions of whether the target in question is appropriate, it may be that the shortfall has been caused by a lack of fiscal loosening, rather than monetary policy.

Solving this problem is easy: both monetary and fiscal levers should be controlled by the same hands. But should those hands be a central banker's, or a politician's?

May is suggesting the latter. But the rationale for removing economic decisions from politicians remains solid: they may game elections by mistiming economic expansion.

The solution could therefore be to move fiscal policy to the Bank of England, rather than taking monetary power from it. Keynes would almost certainly approve: the -ism that bears his name has been unfairly discredited by generations of politicians who like the idea of expansion in difficult times but are reluctant to carry the electoral can for constraining growth with counter-cyclical tightening.


"The solution could therefore be to move fiscal policy to the Bank of England, rather than taking monetary power from it."

Well you can go screw yourself.

This again. Time inconsistency bullshit should be met with a Wray of light -:)



"Keynes would almost certainly approve"

Keynes is dead BTW.

* should have been a :-)

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