Tuesday, 16 June 2009

'We want more Power' ... but do they deserve it?

The Bank of England wants more 'Power' ... but does it deserve it? They have failed to 'lead' and act on our behalf, so why should we give their current 'leaders' more 'authority' and 'power'?

The Government are responsible for setting the wrong targets / goals, removing asset prices (e.g. housing) from the inflation target, and allowing lax regulation of financial services to prevail ... the FSA are responsible for failing to regulate in a proper & responsible manner ... and the Bank of England are responsible for being ignorant to the economic risks and/or choosing to do nothing about them ... 

They are all quite predictably being very careful not to start a blame game - and why? ... because they are ALL to blame ! The Government and the treasury are ultimately responsible, yet there has been no change there, nor in the FSA ... or the Bank of England ...  

Personally I find it hard to believe these groups suffer completely from Ignoromics (and if true they should be fired for this anyway). I do however believe they apply a huge amount of Poweromics and operate with a great deal of collusion. David Blanchflower, arguably one of the better and more challenging members of the Monetary Policy Committee (MPC), is leaving and being replaced by Dr Adam Posen, an American Stephanie Flanders (BBC's Economics Editor) recalls from her days whilst studying economics at Havard (can you see even more of the cosy 'club' here?) ... I think the idea was for us to be re-assured by this, but given the comments made on her blogs it's turned out to be very different ...

... and the solutions proposed are not around changing a member of the crew ... but changing the 'leaders' and the 'system'. Take a look at one of the early comments, and my comments below as well (nb there are many more on her blog too):


Comment 5 (John_from_Hendon)

MMG - Mervyn and his minions MUST Go.

The whole idea of the MPC and the Governor have some from of understanding and will do the right thing in setting interest rates is proven to be wrong and what is worse it is a dangerous falsehood.

We need a new system - not new bodies!

The fact that the Bank 'knew' (and I have it in writing, under both Eddie George and Mervyn King) that their interest rate policy was designed to create a credit bubble as it deliberately and wantonly ignored asset price inflation means that the system must be changed.

They got interest rate policy catastrophically wrong for at least the whole of the last decade. The also knew that they had done so at the time. They are lilly livered cowards who take the Governments shilling and pretend that they are some from of independent experts and are setting interest rates to the best of their ability and skill. (OK, they may be doing their best - but it is totally inadequate!)

Fire the lot and start again. This time the Bank MUST take into account asset price inflation and imported deflation when setting rates - if they do not - the recession will last decades from one bubble to the bust in shorter and more violent cycles and more of the country destroyed each time. Critical to avoiding this - they must restore SOUND MONEY.

Interest rates must value money at some reasonable positive level sufficient to restrain asset price inflation. Asset price inflation is the cause of the banking difficulties along with too low interest rates that created it. So rates up to 4 - 6 percent PDQ.


Comment 7 (leanomist)

Did Adam Posen predict the problem well before it happened? I believe David Blanchflower almost did (or was at least the closest in the MPC).

Let's ask a few more simple questions:

1. Traditional 'economics' is dead. Does he realise this? 

2. Does he know that real 'leaders' predicted this situation over 20 years ago, and predicted a "New Economics" being born "Out of a Crisis"... 

3. Does he know who predicted this (nb- he was a 'creative outsider' and not a eminent lecturer in economics at Havard), why he said this, and what the new form of 'economics' will look like*?

Business schools are 1-2 generations out of date (cf 21st century practices) and it appears this is similar in Economics too. What we need to do is to ask basic questions, bring more realism to bear and adopt some effective & sustainable solutions for once (not just ones that benefit the speculators, money lenders and gentlemen's clubs). 

David Clift, a Future 500 Leader

* NB It won't be Poweromics! NB Poweromics = People using position and power for their own personal gain, based on poor moral values, self interest and greed. More info available at http://poweromics.blogspot.com


Comment 8 (leanomist)

Post 5 John_from_Hendon

"The fact that the Bank 'knew' (and I have it in writing, under both Eddie George and Mervyn King) that their interest rate policy was designed to create a credit bubble as it deliberately and wantonly ignored asset price inflation means that the system must be changed"


... My conversation with an MPC member re the need to include house asset prices inflation properly would support this assertion too ... and hence I agree with John_from_Hendon's conclusion.

Changing one of the 'crew' will do little to stop the ship from sinking, when the whole system was at fault and focused on the wrong targets/goals ... 

... and if the 'leaders' knew this, but chose to do nothing about it, then removing them is arguably the least that should happen (eg. how about taking the losses out of their lucrative pension 'pots' - they would probably have acted then)!

David Clift, a Future 500 Leader


Comment 19 (John_from_Hendon)

One of the many tragedies of the western World's regulatory systems is that its interrelatedness is not well understood and frankly I can't think why?

This new chap may be young and dynamic but if he was educated into the same fundamentally flawed ideas of economics taught at Harvard (or Balliol) over the last two decades.

Their teaching MUST have substantially contributed to the Credit Crunch. (Leaving aside Milton Friedman's silly ideas that underpinned and gave intellectual support for Thatcherism and Reganomics.)

We are still doing the wrong things! These are after all the people who gave intellectual respectability to ignoring house price inflation and zero interest rates and the dafter quantitative easing! They seem to be surprised that ever lower interest rates gave rise to ever more exotic and dafter and exotic ways for the financial community to fiddle the books to show that they were still making money.

None of the economists in the current cadre of those educated in the unscientific and 'fake science' of economics in the last quarter of a century are fit and proper persons for any responsibility even over a whelk stall let alone the Bank of England's interest rates policy - they have shown by creating the conditions for the recent credit boom and bust that they have failed and their education is a failure. 

(In this I agree with the opinions expressed by the majority of the posters to this blog.)

(MMG - Mervyn Must Go)!