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Consigning the sterlingisation zombie to history

Published by Anonymous (not verified) on Mon, 29/11/2021 - 6:35pm in

It is big news when an issue to which this blog has contributed makes it to be an FT headline, but it happened this morning:

Of course, the credit goes to Dr Tim Rideout who spearheaded this campaign, and got the resolutions passed with a majority of 418 to 37, despite warnings being given to the conference that a country having its own currency as a 'dangerous experiment'.

Tim has shared his speech with me. This is it:

The Scottish Reserve Bank (Establishment) Bill


In April 2019 you rejected the Growth Commission sterlingisation proposal in Appendix C.

You voted instead that Scotland should start the preparations for our own currency.

You wanted that to happen as soon as possible after a vote for independence.

The aim was to introduce our new currency as soon as practicable after Independence Day.

This recognised the fact that no advanced economy has ever sought to use the currency of another nation. To try to do so would be to start probably the most dangerous experiment in global monetary history.

So, we need to follow the tried and trusted safe route taken by almost every country to become independent, and that is to have our own currency.

We will use the Scottish Pound – and not the English one.

Having a central bank is a key component of having our own currency. It is also a pre-requisite for applying to rejoin the European Union. Using sterling rules out any EU membership application. So we must plan for that too.

Planning is key. After the Brexit vote London was in a ‘what do we do now’ state of total unpreparedness. It would be inexcusable for us to find ourselves in a similar position when we win Independence, however that is achieved. We will need to be ready, so we hit the ground running. Two years, or whatever it turns out to be, for a transition to Independence Day will go very quickly.

On the currency front there are things we can do now. One of those is to draft the bill to establish the Scottish Reserve Bank as the new central bank of Scotland. That gets us to the point where we are ready to introduce that legislation the day after we vote. Bear in mind it will likely take six months to be approved by Parliament.

The resolution before you is a very truncated version of what Dalkeith Branch submitted. Conference Committee deleted two thirds, namely clauses A to F of the principles for that draft bill. As those are the key elements, I will explain them briefly to you. They are important.

Critically, the Reserve Bank will be owned and controlled by the Scottish Government. It will be the monetary authority, meaning it will create Scottish pounds. It will own the Scottish payments system, and it will be banker to the State.

Vitally, we need to ensure it is under the control of Parliament and answerable at all times to us and our elected representatives. That means things like US style confirmatory hearings for the appointment of the Governor, annual reports, and appearances before parliamentary committees. Accountability is key.

That is because as the monetary authority it will establish and issue the new Scottish currency. It will also set interest rates for lending to commercial banks, and it will work in collaboration with other international central banks. That means it will hold and manage our foreign reserves on behalf of the Finance Ministry.

At home, it will maintain the Scottish Government’s accounts and will provide such loan and overdraft facilities as are required to achieve the government’s fiscal policies, such as full employment and the Green New Deal.

Lastly, as envisaged by Douglas Chapman MP, it could manage a Scottish Sovereign Wealth Fund.

The Amendment to the resolution provides a forum to discuss those principles and I would urge you to support that.

In nearly 50 talks around Scotland, it is clear to me that you, Delegates, know that there is only one choice. That is our own currency. Let us start that process now, by voting in favour of the resolution.

Warm congratulations to Tim.

But, I also note that the FT reports:

Asked after the vote, the SNP said: “The currency of an independent Scotland will continue to be the pound sterling until a new currency can be safely and securely established in the interests of the whole economy. A Scottish currency will be introduced as soon as practicable after independence.”

That is not exactly a warm endorsement of what the SNP membership had clearly indicated to be their wish.

I leave the last word to Tim though. As he noted in a Tweet:

I hope the sterlingisation zombie now has a stake through the heart.

I can but agree.

Central banks should not have the power to cause harm, as the Bank of England has at present

Published by Anonymous (not verified) on Fri, 19/11/2021 - 7:01pm in

As some readers of this column will know, I write a weekly column for The National newspaper in Scotland. In yesterday's column, I tackled the issue of inflation.

Some of the arguments that I made will be familiar to readers here. Others will not be. This was my conclusion:

There is, of course, nothing that anyone in Scotland can do to oppose [an increase in the Bank of  England's official interest rate].  Not only is this a decision reserved for Westminster, it is one that Westminster has outsourced to economists and bankers who almost entirely share a City of London perspective on the world. Scotland simply has to suffer the resulting damage.

However, there are lessons to learn from this, of which the most important by far is that if Scotland is to be independent then it must not make the mistake of outsourcing such decisions to theoretical economists, bankers and members of the financial services community, most of whom are out of touch with the reality of life as most people live it. Interest rate setting policy should not be the preserve of elites. It should be managed by democratically elected politicians who are accountable to a parliament and their electorates for the decisions that they make, especially when they are inappropriate and harmful. When Scotland has its own central bank, as I hope it will, it must not have the power to cause harm, as the Bank of England has at present.

A future government in the rest of the UK might be just as wise to take note of that.

An increase in interest rates would be an act of class warfare

Published by Anonymous (not verified) on Tue, 16/11/2021 - 7:47pm in


Banking, Economics

The Bank of England is sending out signals, again, that it is expecting to increase bank interest rates soon. The current official interest rate is, admittedly, at a record low level, but the question to be asked is what would an increase achieve?

The official response is that it will help curb inflation. This, however, makes no sense. The inflation that we currently have is very largely due to increases in the prices of durable goods, such as cars. The supply of these has been severely disrupted after COVID because of worldwide disorganisation of shipping as world economies sought to reopen. This disruption is already resolving, but meanwhile people have already deferred their purchases of these goods in anticipation of prices falling. Once they are back on the shelves, or on the forecourts, there is a real chance that prices might actually fall. In that case It is very likely that current inflation is going to solve itself very soon, and that we could even see deflation at least in the price of these goods.

This, factually based, reasoning appears to have no influence on Bank of England thinking. so, in that case why are they really looking to increase interest rates, even if only modestly? I can offer three reasons.

The first is that dogmatically they believe that they have a duty to respond to any inflation increase by increasing interest rates. Their logic has a number of dimensions to it. They do, for example, think that interest rate increases simply change the economic mood, and so deter spending, so cutting inflationary pressure. They also think that households with fixed budgets who have to pay more interest will, inevitably, spend less and so reduce their consumption spending, which reduces inflationary pressure. And they think that saving is motivated by interest rates and that higher rates will result in increased saving, again reducing consumption spending. In combination they do, therefore, think that they will do good, although they also know that because the feedback loops that create these processes of change are very long the immediate impact of anything that they do is decidedly limited. In fact, the current inflationary pressures may resolve well before these consequences are seen.

Second, bankers look after bankers, and low interest rates make it very hard for banks to make any profit from conventional deposit taking. So, whenever they have opportunity, bankers will seek to increase rates to in turn increase bank profits. Most members of the Bank of England Monetary Policy Committee have some association with banking. Do not dismiss this as an issue in that case.

Third, bankers also serve the interests of their best customers, and their best customers are the wealthy. They are objecting very strongly to current low interest rates even though they have profited enormously as a consequence of the asset price increases that they have fuelled. Having their cake is not enough for this group, however. They also want to eat it, which means that they also want an increased income rate of return as well. Sending out a signal that interest rate rises will happen appeases their demand for action.

It is, then, easy to explain why bankers want to increase interest rates. But, implicit in all this is something else. Note who bears the greatest proportional burden of this change. It is  borrowers.  The wealthy borrow by choice. Those least well off do so out of necessity. The wealthy can, then, also choose to avoid the impact of any decision by the Bank of England. In contrast, indebted households cannot do so. Any interest rate increase is, as a consequence, wholly intended to oppress those who already face stressed household budgets. These tend to be parents, younger people, those on lower incomes and people who cannot now enjoy social security benefits that were once available.

There is no need to increase interest rates at present. There is no need for the Bank of England to signal to financial markets that they should, in turn, increase rates. But they are doing so. In the process they are engaging in what anyone might call class warfare. You do not need to be a Marxist (and I am not) to say so. This fact is written all over the policy.

I object to interest rate increases because they are not needed and could destabilise the economy. But I object just as much for this second reason, which is that yet again policy is being put in place that is intended to send wealth from those with least to those with the most, and that is not the basis for any sustainable society.

The vain futility of financiers

Published by Anonymous (not verified) on Thu, 04/11/2021 - 6:57pm in



Bankers like to think that they are the masters of the universe.  Central bankers are the worst kind of bankers in this regard. The actions of the current and previous Governors of the Bank of England are evidence of this today.

As the FT notes this morning:

Nothing that this interest rate rise will do will in any way solve a lorry driver shortage. Nor will it solve a gas crisis. It will not out Turkey's on plates at Christmas. It will not fill an empty shelf anywhere. And they, and not excess demand arising from a surplus of earnings in the economy, are the cause of the inflation that we are suffering. Nonetheless, Andrew Bailey thinks he has to be seen to do something. He has backed himself into a corner where he has no choice but do so. And as a result, rates will rise.

The consequence is that hard up people will see their interest payments rise on loans, which will make life for them tougher still. The result will be to tip the mood ever so slightly more towards recession in the UK, which no one is seeking. And in a year, every cause o this inflation will have disappeared, and the inflation with it. But the legacy of cost for households will remain. Such is the folly of central bankers.

And then there was Mark Carney. As the FT again notes:

Mark Carney has announced the GFANZ - the Glasgow Financial Alliance for Net-Zero. It sounds good. He says $130 trillion of assets are available for investment. But that is simply not true. The gross assets of those saying that they will commit to net-zero are not all available for that purpose.

For a start, large parts of the portfolios of the banks in the GFANZ are invested in mortgages and credit card balances. Those are not going to become very green very soon unless we are going to see mortgages only offered on A-rated houses and credit cards can only being used for buying low carbon items. Neither seems in the slightest bit likely, at least not unless banking is going to change in ways I really did not expect.

There is then no good reason then to claim that $130trn of assets have been committed to this task. Greenwash really does not help.

It helps even less when the new accounting rules that will come out of COP26 also have their roots in Mark Carney's work - and they have to be credible. For precisely that reason I really want Carney's proclamations to be as credible as possible. This one was not. Everyone needs to do better than that. It would help if they did.

£4 of the weekly cut in Universal Credit is going to be given in tax cuts to the UK’s banks

Published by Anonymous (not verified) on Wed, 20/10/2021 - 6:14pm in

As the FT notes this morning:

Rishi Sunak will slash a tax surcharge on bank profits by more than 60 per cent in next week’s Budget in an effort to keep the City of London competitive on a global scale in the wake of Brexit.

The chancellor will cut the surcharge from 8 per cent to 3 per cent from April 2023.

This surcharge increases the rate of corporation tax paid by banks from the 19% currently due to 27% at present, which will fall to 22% if Sunak's plan goes ahead.

What's the cost? It is hard to say precisely as the existing corporation tax statistics do not show the sum paid by banks separately, but PWC suggest that the total paid may be £2 billion. That would put the cost of the cut at £1 .2 billion.

The cut in Universal Credit by cancelling the £20 a week uplift supposedly saved the Chancellor £6 billion.

I am sure that all the families suffering a £20 decrease in their Universal Credit will be pleased to know that £4 a week of that sum will be redirected to banks to keep them competitive. That's what these figures imply.

I doubt that the thought that they're helping out bankers is going to provide much comfort to all losing their benefits this winter.

The threat from crypto

Published by Anonymous (not verified) on Fri, 01/10/2021 - 11:49pm in

I am sharing this blog from the IMF, simply because I think it really important:

Crypto Boom Poses New Challenges to Financial Stability

By Dimitris DrakopoulosFabio Natalucci, and Evan Papageorgiou

As crypto assets take hold, regulators need to step up.

Crypto assets offer a new world of opportunities: Quick and easy payments. Innovative financial services. Inclusive access to previously “unbanked” parts of the world. All are made possible by the crypto ecosystem.

But along with the opportunities come challenges and risks. The latest Global Financial Stability Report describes the risks posed by the crypto ecosystem and offers some policy options to help navigate this uncharted territory.

The Crypto Ecosystem—What Is It, What’s at Risk?

The total market value of all the crypto assets surpassed $2 trillion as of September 2021—a 10-fold increase since early 2020. An entire ecosystem is also flourishing, replete with exchanges, wallets, miners, and stablecoin issuers.

Many of these entities lack strong operational, governance, and risk practices. Crypto exchanges, for instance, have faced significant disruptions during periods of market turbulence. There are also several high-profile cases of hacking-related thefts of customer funds. So far, these incidents have not had a significant impact on financial stability. However, as crypto assets become more mainstream, their importance in terms of potential implications for the wider economy is set to increase.


Consumer protection risks remain substantial given limited or inadequate disclosure and oversight. For example, more than 16,000 tokens have been listed in various exchanges and around 9,000 exist today, while the rest have disappeared in some form. For example, many of them have no volumes or the developers have walked away from the project. Some were likely created solely for speculation purposes or even outright fraud.

The (pseudo) anonymity of crypto assets also creates data gaps for regulators and can open unwanted doors for money laundering, as well as terrorist financing. Although authorities may be able to trace illicit transactions, they may not be able to identify the parties to such transactions. Additionally, the crypto ecosystem falls under different regulatory frameworks in different countries, making coordination more challenging. For example, most transactions on crypto exchanges happen through entities that operate primarily in offshore financial centers. This makes supervision and enforcement not only challenging, but nearly impossible without international collaboration.

Stablecoins—which aim to peg their value usually against the US dollar—are also growing at lightning speed, with their supply climbing 4-fold throughout 2021 to reach $120 billion. The term “stablecoin,” however, captures a very diverse group of crypto assets and can be misleading. Given the composition of their reserves, some stablecoins could be subject to runs, with knock-on effects to the financial system. The runs could be driven by investor concerns about the quality of their reserves or the speed at which reserves can be liquidated to meet potential redemptions.

chart 2

Significant challenges ahead

Although the extent of the adoption of crypto assets is difficult to measure, surveys and other measures suggest that emerging market and developing economies may be leading the way. Most notably, residents in these countries increased their trading volumes in crypto exchanges sharply in 2021.

Looking ahead, widespread and rapid adoption can pose significant challenges by reinforcing dollarization forces in the economy—or in this case cryptoization—where residents start using crypto assets instead of the local currency. Cryptoization can reduce the ability of central banks to effectively implement monetary policy. It could also create financial stability risks, for example through funding and solvency risks arising from currency mismatches, as well as amplify the importance of some of the previously mentioned risks to consumer protection and financial integrity.

Threats to fiscal policy could also intensify, given the potential for crypto assets to facilitate tax evasion. And seigniorage (the profits accruing from the right to issue currency) may also decline. Increased demand for crypto assets could also facilitate capital outflows that impact the foreign exchange market.

Finally, a migration of crypto “mining” activity out of China to other emerging market and developing economies can have an important impact on domestic energy use—especially in countries that rely on more C02-intensive forms of energy, as well as those that subsidize energy costs—given the large amount of energy needed for mining activities.

Policy action

As a first step, regulators and supervisors need to be able to monitor rapid developments in the crypto ecosystem and the risks they create by swiftly tackling data gaps. The global nature of crypto assets means that policymakers should enhance cross-border coordination to minimize the risks of regulatory arbitrage and ensure effective supervision and enforcement.

National regulators should also prioritize the implementation of existing global standards. Standards focused on crypto assets are currently mostly limited to money laundering and proposals on bank exposures. However, other international standards—in areas such as securities regulation, as well as payments, clearing and settlements may also be applicable and need attention.

As the role of stablecoins grows, regulations should be proportionate to the risks they pose and the economic functions they serve. For example, rules should be aligned with entities that provide similar products (e.g., bank deposits or money market funds).

In some emerging markets and developing economies, cryptoization can be driven by weak central bank credibility, vulnerable banking systems, inefficiencies in payment systems and limited access to financial services. Authorities should prioritize strengthening macroeconomic policies and consider the benefits of issuing central bank digital currencies and improving payment systems. Central bank digital currencies may help reduce cryptoization pressures if they help satisfy a need for better payment technologies.

Globally, policymakers should prioritize making cross-border payments faster, cheaper, more transparent and inclusive through the G20 Cross Border Payments Roadmap.

Time is of the essence, and action needs to be decisive, swift and well-coordinated globally to allow the benefits to flow but, at the same time, also address the vulnerabilities.

The opponents of MMT really have got to do better than the Banque de France do if they are to counter its arguments

Published by Anonymous (not verified) on Thu, 30/09/2021 - 5:28pm in

The Banque de France has issued a working paper on modern monetary theory (MMT). In the introduction to it they say:

In the last few years in the U.S. and especially since the publication of Stephanie Kelton’s book, The Deficit Myth (Kelton, 2020) in Europe, the so-called Modern Monetary Theory (MMT) has been gaining prominence in the media and the public. This paper exposes the main proposals of MMT in the light of their doctrinal sources, also confronting them with economic facts and with other currents of economic thought.

Their conclusion is:

Overall, it appears that MMT is based on an outdated approach to economics and that the meaning of MMT is a more that of a political manifesto than of a genuine economic theory.

They then produce this table, which they say summarises the differences between MMT and what they consider to be mainstream economics:

I have read the paper. The table is a good summary of the naive arguments within it. In a world where the authors believe (incorrectly) that argument can be summarised by polar opposites they create caricatures that are false, not only about MMT but also about the system they claim to support.

For example, as a matter of fact taxes very clearly do not pay for all government spending, despite their claim that it does in their world view. Borrowing and QE clearly do as well, and neither shows any sign of being unwound.

There is also not a shred of evidence that crowding out is an issue in a world where there is a glut of savings.

Nor can anyone suggest how public debt purchased by a central bank might be ‘paid off’ when the credit balance on the central bank balance sheets after that debt repurchase does not relate to public debt anymore, but does instead represent bank deposit accounts from clearing banks, the redemption of which requires the cancellation of the money created that these balances represent.

And, as is apparent from the most basic knowledge of the economics of inflation, supply side inflation cannot be addressed using monetary policy, although latest announcements from the Bank of England show that they do not know that.

Similar critiques of the other claims made for neoclassical thinking could be offered. At best these claims are glib. They are all caricatures. Most are obviously wrong.

So if they could not get their own side of the argument right did they come close to the truth with MMT? They did not., of course. That is very largely because they treat issues as if they exist within a silo. So the role of tax is completely misportated because not only is the wrong silo selection  criteria used, the relationships between silos is ignored.

To expand in this, that tax is used to cancel money creation (which, as a matter of fact takes place) to limit inflation as part of an overall policy of fiscal management to determine optimal levels of economic activity to achieve desired social outcomes such as sustainability within the constraints of the actual resources available within the economy is ignored. That type of integrated thinking cannot be fitted into their silos.

That is deeply telling. Using reductionist, rather than systems thinking, the authors reveal a profoundly Cartesian view of economics, using a faux-scientific approach which denies the integrated reality that the observable economy actually is coupled with a denial of the political reality of all economic decision making, including their own.

The authors use this useful blindness within their own methodological toolbox to justify their claim that MMT is a political construct. They do not see their own support for supposed central bank independence as another such construct that just happens to be intensely anti-democratic. Numerous other such comparisons could be made, so blind are the authors to their own biases.

What should be made of this paper in that case? It is best seen as little more than  a puff-piece presented as if an economic argument that is intended to support the status quo against a truth so apparent that those seeking to maintain their grip on power must quite literally make up arguments to support their case that are so shallow they do in the process reveal the hollowness of their own ideas.

The opponents of MMT really have got to do better than the Banque de France do if they are to counter its arguments. This was a lazy, ill informed and so blatantly biased piece of work that the Banque should be deeply embarrassed by the work of its chosen authors.

It’s tax cut and big bonus time for the City of London

Published by Anonymous (not verified) on Mon, 20/09/2021 - 5:06pm in

As the FT has noted this morning:

John Glen, City minister, has vowed that Britain’s financial services sector will enjoy “competitive tax rates” as he paved the way for a Budget cut to the 8 per cent surcharge on the sector.

The same article also noted that the government was reviewing the cap on bankers’ bonuses, which was an EU requirement. The aim is to boost the City of London.

So, as large numbers of working people in the UK face increased NIC, consumer price inflation, massive employment uncertainty, cuts in universal credit, and straightforward shortages because business cannot plan how to get out of a paper bag, let alone recover from an economic lockdown, the City’s bankers face tax cuts and bigger bonuses.

You really cannot make this stuff up. When the government talks about levelling up it fails to mention that the actual plan is to increase inequality, considerably. That’s what the evidence shows. Let’s ignore the rhetoric and look at the reality. That reality is that this remains an economy run for the benefit of the City. Everyone else is incidental. It’s really not hard to work that out, and people will.

Positive Money and the Bank of England are completely wrong to support the idea of a central bank digital currency for the UK

Published by Anonymous (not verified) on Fri, 03/09/2021 - 8:36pm in

Positive Money has made an appeal asking that people support the idea of a Bank of England central bank digital currency (CBDC) in the UK. In particular, they have asked that people make submissions to the Bank of England on this issue. A number of people have asked me for comment, and I have decided it appropriate to do so. The Bank of England survey is here.

I regret that as has been so often the case Positive Money get most of their logic on this issue hopelessly wrong. Quite staggeringly they are using this proposal to demand the end to the right of private banks to create money, and as I note below the Bank of England will not want to take on that role, so what Positive Money are proposing is that we crash the economy by denying it access to any new money. As ever, Positive Money remains committed to some perverted sort of gold standard that would drive the UK into deep recession. All that reveals they simply have no idea how money works.  I regret having to say it, but you would think by now that they would have learned what money is and what the needs for it within an economy might be, but apparently not.

So, let me state the obvious to start this response. That is to say that we already have a digital currency in the UK. Your bank account is already part of a wholly digital currency system. So, there is no obvious need for a CBDC unless it does something better than your existing bank account or existing money can do.

Then let me as clear as it is possible to be: no one, anywhere, has yet found any evidence that a so called digital currency of any form can do that.

The truth is that for an individual to switch their banking to a CBDC account with the Bank of England may well make them very much worse off. There are a number of reasons, and broadly I'll move from the specific to the more general in  the argument that follows.

First, I rather strongly suspect the Bank of England will not consider granting personal overdrafts as part of a CDBC service. In that case anyone who needs one had better look elsewhere. A CDBC is not for them.

Second, given that many transactions are digitally recorded on credit cards and not debit cards and I cannot see the Bank of England issuing credit cards I cannot see their CBDCs as a way of digitising most transactions. For those requiring credit card facilities you will still need to look elsewhere. So a CDBC may well not be for you.

Third, anyone with chaotic financial affairs - which is the reason why many on low incomes remain unbanked through no fault of their own - is not going to find their chaotic scenario aided by a sympathetic Bank of England manager. So the claim that CBDCs might improve access to banking is just wrong.

Fourth, banks lend. That is their business. But, I cannot see the Bank of England doing that to individuals any more than they might offer overdrafts. So they would not be providing what might be called a banking service. You’d still need banks for that. So CDBCs are not alternative banking, at all.

Instead, and fifth, what the Bank of England might do is simply offer what will in effect be savings accounts, whether they be current accounts for day-to-day transactions where the accounts stay in credit as far as the customer is concerned, or term deposit savings accounts. So CBDCs will provide a small part of the banking service people need. Which makes them pretty irrelevant then.

Sixth, this creates a real conceptual problem because rather bizarrely when anyone saves with the Bank of England they currently increase what is called the national debt. Central bank reserve accounts held by the UK’s clearing banks at the Bank of England are supposedly part of the national debt even though they are simply bank deposit accounts. So too are National Savings accounts part of the national debt. So, running CBDCs would apparently require that this paranoia be overcome. No one is suggesting how that might be done. Nor is anyone discussing what the Bank of England might do with the funds deposited with it. That is the most massive going flaw in their whole paper - and in Positive Money's response to it.

Seventh, despite lip service to the issue neither Positive Money or the Bank of England (based on some of their comments on their website in this proposal) seem to be aware that savings are not what creates the UK money supply. The UK’s money supply is created by lending. Savings are then created by that lending. But the savings are never lent on: they represent money stored inactively in the economy. Seeking to focus banking reform in the inactivity that saving represents would appear to be the most unhelpful way of addressing the issue.

I could go on, but by now I hope you will appreciate that I have major reservations about what is being proposed.

That said, I have many reasons for thinking banking reform is necessary, and that some aspects of CBDCs might have a role in that.

I have argued for a long time, and right through the 2008/09 banking crisis, that the bank payments platform should be taken out of the control of creating banks and be brought under state control. This is because the creaking architecture of private banking cannot be permitted to hold the country to ransom during banking crises, requiring that banks be bailed out to maintain the infrastructure for bank payments.

What is instead required is a banking system where the accounts and payments structure is all under state control but banks provide a credit creation service based on that infrastructure in which private capital takes the risk of default without their being macroeconomic risk to the state, or risk to bank depositors because the accounts of a failed bank can be readily transferred to another operator if a bank fails. Call this the Railtrack model of banning if you like, with the infrastructure being state owned and with licensed banks working on it.

This is the risk the Bank of England should be concentrating on, but which it is not.

Positive Money, with its residual enthusiasm for gold standards and non-fiat currencies and banking, seems to not even see the issue.

A CBDC could be the inter-bank currency in my model - replacing central bank reserve accounts - but that is about it.

This whole issue of digital currencies is a problem seeking a reason for existing. The sooner digital currencies are simply seen as the Ponzi schemes that they are the better. And that is what the Bank of England should be saying if it is a responsible banking regulator that understands the issues it is addressing, which this consultation implies it does not.

But, in summary, please do not support Positive Money on this issue: they are, as is usual, completely wrong when it comes to money.

The new chief economist at the Bank of England is setting us on a route for recession

Published by Anonymous (not verified) on Thu, 02/09/2021 - 4:01pm in

I posted this on Twitter yesterday afternoon:

My reasoning was straightforward. We have a new chief economist at the Bank of England, who will serve on its Monetary Policy Committee and so be responsible for setting interest rates for the UK, who looks as though he has come out of central casting to be the stereotypical neoliberal banker.

Leave aside why the Bank needed another white, late middle age member of the committee for the moment.

And try to ignore the fact that he is ex-Goldman Sachs, as if any more influence from that bank was required.

Pretend for a moment that he has a strong academic record (which it’s not clear he has) which would seem to be a pre-requisite for this job.

Instead note that it is reported that he does not have much faith in QE and is a conventional monetary economist. In other words, he thinks that the government should rely on bond markets, which is wholly unnecessary, and should vary interest rates to beat inflation because that is the focus of conventional monetary policy. In fact, that is all there is to it.

How is such a person, who wishes we were still living in 2007, going to help in the situation we now face in the UK? How too are they going to help create policy that will do anything but serve the interests of banks and the very rich? It is very hard to tell.

As Danny Blanchflower tweeted a little later yesterday:

Too darned right we will be. If ever there was a moment to have a voice criticising the City from outside its boundaries this is it. And that is what Danny and I will be doing.

Put Huw Pill’s conventional monetary policy together with Rishi Sunak’s very apparent desire for cuts in government sending and the current economic recipe is for a prolonged recession, induced solely by policy makers acting without any concern for the people of the UK as a whole.