Credit and credibility

They bet wrong.

Same risk run by every other player.

Neither banks nor energy companies are passing on any benefits, they won't.

Whats really interesting is the record investment that is taking place in farming at the moment. I sense higher food prices coming, ready to soak up any extra cash that is input into the money supply by desperate measures.

Look at what has happened to the price of oil since September

This was the only source of potential inflation , and it has dropped like a stone

Keep up Mr Peston

Look at what has happened to the price of crude oil since September - this was the only source of potential inflation - and it has dropped like a stone since then

Keep up Mr Peston

Yes I agree it has to provide a straightforward appraisal of how it (and for once who) made such a mess of it.

On the other hand its the best option we have got,better surely than any politician having a major say in setting interest rates.

@WerringtonSilent

"They bet wrong. Same risk run by every other player."

The only difference being that they are gambling with other people's money.

Baldric

A week may be a long time in politics but finance works by the minute even the second.

You should know that.

Running an economy is like trying to play 4 dimensional chess.

I see you have struggled yet again to grasp the basics.

I wonder.

Have you got a cunning plan?

Seems a bit harsh on the BOE comittee.

They can only go on the figures available, which last month suggested inflation was running out of control and if anything needs interest rates increasing!

I don't remember you demanding higher interest rates for the 6 months Robert?

Seems you only react to events and data as well!

"Pot calling the kettle black" I think.

What I find funny about the MPC is that for months they were telling us that it takes months, if not years, for any rate increases to feed through to impact inflation. Yet here they are now wanting us to believe that inflation is either going to be so bad in a couple of years time that these deep rate cuts are needed, or that they are saying that rate cuts will actually help keep inflation in check in the near term.

Come on MPC, which is it? Or are you finally going to admit that these latest decisions were political and not based on your remit?

Expect a general election by May 09.

yes #4 its a pity my gas bill hasnt though.and a thought on interest rates.i feel sorry for savers...but your best bet is all draw all their money out and spend it in spain.
if you cant beat them join them..join all the rest of the people borrowing and spending without any thought of saving who cares..let the whole system collapse who cares.

Robert,

You are absolutely correct to highlight the Bank of England's lack of credibility.

They helped create the bubble economy when the held rates far too low for far too long against the advice of some independent commentators (me for one)

Now they suddenly change their tack on the economy over the space of a couple of months. Many commentator on your blogs, for example, were warning of these problems many months ago, but their hubris and arrogance prevented them from seeing what was absolutely plain to almost everyone else.

They are the agents of their own destruction - their actions are destroying the credibility of the financial control mechanisms.

But what should be done?

A new Head of the Bank and new interest rate setting committee members seem essential. But where to get them from? The so called experts have proved themselves to be windbags rather than acute and accurate analysts. Key to the reconstruction of credibility is the reconstruction of the Bank.

The bank knows what it did wrong in the recent past, but they seem unable to read the history books to see what they should do now. I admit that perhaps there is nothing to be done except to let events take their course. Their intervention in the past has compounded the errors in the regulatory system and I do not see that today is any different. One thing they must refrain from doing is to create another bubble and that seems to be exactly what they have set out to do - absolutely insane, but also quite predictable!

The cut in interest rates will probably mean another drop in the value of the pound, thence any benefit from the fall in the oil price will be lost, since we buy oil in dollars. This means transport and business costs will also rise and consequently food , gas and electricity will rise. If the government seriously wants to help people through a difficult time, reduce VAT, income tax and fuel tax ; no chance of that though. Looks like Mervyn King has joined Brown and Darling in the drowning men club looking for a straw to cling to.

Oh come on Peston,you know damn well why this is happening.

The People that run the world (have the assets) have found that the FRB model is bust and can not be sustained any longer. Their system has or will bust all of us and therefore they need to devalue the debt as quickly as possible to ensure the debt can disappear.

In doing so, they can then start again!!! or invent a new model for making money

So to recap

The debt is too big to fail
Devalue the debt away
Stuff everything incorporated within it
Start again

Now please stop treating your listeners with contempt and play the game

Thank you

the only benefit to rate cuts is to benefit the rich.
banks, energy companies etc wont pass on the reduction to the lesser consumer becouse these banks etc will need to make a profit to keep there share holders.
the government have no interest in helping the people becouse they are too concerned with banks etc.
then we never see the government reducing any of there taxes now do we, duty on alcohol,tobacco, fuel etc only ever seem to rise.

Are we inching closer to some straight answers about what has happened in recent months?

Public anger about the behaviour of the banks continue to build. Members of the public are allowed to email questions to the Treasury Select Committee. They ask some very basic questions and get no sensible answers. Even the Queen is not amused.

And now we will sit here while banks equivocate and manipulate the fine print of their saving and loan offerings, until we are again persuaded to forget that a rate cut should bring any benefit to the ordinary citizen.

In no other part of public life would the level of arrogance displayed by the banks be tolerated. And whether they like it or not, they are now part of public life, propped up with taxpayers funds.

Had these failures of regulation, and these dire consequences for the general public, arisen as a result of the actions of local government or the health service, we would never have heard the end of it. Formal public inquiries would be the order of the day. But Government's obeisance to the City seems still to hold sway.

The outcome is that ordinary citizens are becoming increasingly aware that we are witnessing a generational failure of government, and not just of the implosion of a financial services industry out of control.

People want some honest answers, some honest analysis, and some serious measures to stop a repeat in 10 years time. Time for some Ministers to grasp the nettle and to agree to a proper public enquiry. Only then is there a chance that the boards of banks, hedge funds, and credit rating agencies will be made to explain themselves to the ordinary mortal, in a vocabulary stripped of their nonsensical and self-serving jargon.

The Bank should still be worried about inflation: the pound has plunged against the dollar/chinese yuan, while Chinese inflation is pushing up their export prices. Try finding something in the shops that is not made in China. Clothes and household goods inflation will be running at 15%+ next year.

To be fair to the Bank of England and other central banks, oil, metals and food price futures were a lot higher a few months ago.

"Second round effects" on wages and other prices from these sources were the main threat.

Now its clear global growth will deteriorate enough that commodity prices will probably decline at annual rates.

And if you were sure in September oil prices would be $60 a barrel now, then fair play.

But lets face it, you could have made a fortune....it wasnt exactly a complete no brainer.

This is not to say that UK rates were not too high and they were substantially above euro rates up to today.

But the debate is a lot less clear cut than your blog implies, Robert.

When will it be the media's turn to report some good news to encourage people to spend again and create the growth the UK needs? Interest rate drops are good news to most people - not Robert Peston though!

Why is it assumed that the BoE has been 'successful' in controlling inflation in the last 11 years. There have been so many significant influences in this period which had very little to do with anything that the BoE did. If the Far East, ie China, is flooding the UK market with very cheap goods do you think that has no impact on costs to the consumer. Or are we giving the BoE credit for running the Chinese economy too, because that is implicit in saying job well done. Part of the current problem is far too much credence has been given to supposed skill in management of the economy whether at the BoE, or with Brown, when much of what has been evident has in fact been far more likely to just be secondary effects from an out of control situation. Whether the BoE had UK housing inflation written out of the equation by Brown it still remains lacking that nothing was done to try to remedy the situation. I buy the crash dummy management model as being the most likely one in place. If the results are what you wish to see then you look no further.

Nothing much of what anyone says or does matters... trying to apply logic to what's going on is futile.
The oil price was driving inflation fears... we were told we were running out of it so the price went sky high; now we're told actually there's too much and the producers are cutting production; and a cut in production should put the price up, but its dropping like a stone!
The economic indicators from the US are going from bad to worse; the government's debt is monstrous, but the dollar strengthens!
Companies are worth squillions at 10 in the morning and next to nothing by mid afternoon, and all on the word of "experts" who couldn't see an express train coming from 6 feet away!
The BOE makes a bold interest rate cut... everyone loves it and the FTSE soars... then everyone changes their mind again and the FTSE drops like a stone!
I could go on, but I'm getting bored. The bottom line is that the so-called experts, including those at the BOE, the ECB the Fed and all the market analysts and commentators have been found out... they're being paid vast amounts of money for expertise, advice and comment that is far from "expert"; they haven't got a clue and are running around trying to come up with intelligent words that keep them in their jobs. I'm with the Queen on this one... with this financial crisis being as serious as it is, how come no-one saw it coming?
As for the BOE having some explaining to do... why single them out.... EVERYONE has some explaining to do but the trouble is the only commentary they all keep coming up with come from a big stinking pile of BS.

It is all confidence trick Robert.
No one in the U.K believes that inflation has been between 2 and 4% over the last 2 years (except of course politicians and wage setters).
No one in the U.K believes that inflation has been between (smoothed) 1 and 2% since 1997 according to the MPC's remit.
2000-2003 house prices doubled. That is a reputed 40% of the British economy accelerated by 100%. Real inflation between 2000-2003 was above 10%.
Compare the real increases in costs that companies and individuals have experienced over the last 12 months. 4% inflation is a joke because CPI is a joke. How can consumer price inflation not include the biggest purchase a consumer ever makes. How can you measure expansion in the money supply if you don't actually measure expansion in the money supply which economic theory say's is the core definition of inflation.

The current financial ills both in the U.K and in Western governments has (in my opinion) come about because people have been leveraging this extra money created in the economies by this disparity between money supply expansion and quoted inflation. That is where the 'cheap' money came in. Trust in CPI is shot, trust in rate setters is shot, and the real value of 'cash' is being recognised and charged accordingly by the banks for access to it.

The difference in the five weeks was dictator Brown forcing the "Independent BOE" to cut rates.

By-Election and crashing popularity even worse than previous, anything to do with it one wonders ?

This shambles of a Government will do anything and sell the countries future further down the proverbial river just to try and save its skin.

One thing may come out of the tenure of Blair and Brown and that is we dont need any MP's in the future. They are never asked for their opinion or given any information or time in the Commons to debate issues so why bother voting the puppets in and why bother paying them to make up the numbers for the scam called democracy.

The weakness of the British economy? The weakness of the world economy? It is built on credit and now the money from the future has to be paid back.

The minute the credit crunch occured we were heading for Depression. Why? Because the banks themselves calculated (or justly feared) that there are debts that are not going to be paid back so they better start strengthening their positions or, as G.W.Bush put it, 'the sucker's going down'.

Remember? All the banks stopped together. This was either coordinated so the banks could protect themselves or once one bank did it, they all had to. It isn't important. But once it happened, once the banks went into self-protect mode the basis for a debt and deflation spiral was set and that's where we have been heading; that is where we are still heading; that is where we will end-up. What person reading this, except a mindless optimist or a hopeless free marketeer, could say that, as the bad debts increase and the write-downs continue, the banks will still lend? Get Real!

Barack Obama's most important part of his speech seems to have gone unnoticed: he said, 'We might not be able to solve all the problems even in two terms.' To me, my subjective INTERPRETATION of this is an admission that we are in for a long, long haul and anyone who thinks we're coming back-up in 2010 is sadly, tragically deluded. Coming back-up with what and how? We'll still be just getting going as the public finances start to be much more sharply cut and even the government jobs are going OR pay cuts.

The guys at the top don't really know what they're doing, do they? And clearly they never have.

It's all a sham - it's good that we know that now.

Let's find a better way.

The government and Bank of England are looking totally inept.

Poor Alistair Darling was forced to admit today that he had no powers to force banks to pass on interest rate cuts.

Northern Rock, HBOS and RBS should have been left to fail.

Tax payers have been sold a pup!

I'm sure there is nothing wrong with the Bank of England's judgement.

Like everyone else they can only go from the figures they are provided with.

Obviously something has happened which has truly shocked them into this.

You just haven't found out what it is yet Robert.

A massive hangover follows a huge credit binge. Like treatment for an alcoholic or drug addict, all the Bank of England can do is introduce more credit. The whole system is flawed. Private banks should ONLY lend what is saved with them, and the Bank of England should decide how much new money is required each month for new business and population so money supply increases slowly, as do prices, so we do not have these credit binges and busts. They will never learn and insist on using the same failed treatment of interest rates to solve the problem, in the same way that blood letting was thought to help a patient before we knew better . Present day economists and politicians are like those old time doctors.

Tucked away on your business page is a report from the IMF out today that is headlined "IMF cuts economic growth forecast"
https://news.bbc.co.uk/1/hi/business/7713778.stm
In the BBC report it states that "It is predicting that developed economies as a whole will shrink by 0.3% next year, having predicted growth of 0.5% less than a month ago." Perhaps this answers your question?

More worrying is that it also states

"Worst hit will be the UK, shrinking 1.3%, followed by Germany at 0.8% and the US and Spain contracting by 0.7%."

Why, when the PM has been claiming that we are better placed than most economies to weather this storm, has a report from the IMF showing in fact we are very badly placed and likely to be hit hardest, been hidden away by the BBC?

"because the Bank of England's success for a decade after 1997 in controlling inflation and providing a firm foundation for stable economic growth stemmed in part from its credibility."

Robert, I'm not sure whether you're being serious here or not. I think all this avalanche of credit crunch info is making your brain a bit fuzzy. Either that or you are deluded.

1997 was the year that the BoE was guaranteed autonomy once again by Tony Blair. By that, I mean that the gov't was no longer allowed to 'meddle' with BoE policy.

Of course, we all know that the BoE is a private limited company, with shareholders (and I'd like to challenge anyone out there to find out who they are), so this backing off by the gov't really allowed the BoE completely free reign. Remember, the BoE is a private company with a board of directors and shareholders - they are in business to make profit for their shareholders (£100+m last year, I believe).

And you are calling the BoE CREDIBLE? The BoE is at the top of a pyramid of a banking system that facilitated and encouraged these criminal bankers over the last ten years to siphon off trillions of pounds in to offshore accounts and buy exotic islands to whence they will escape to when it goes Mad Max in good old Blighty.

I absolutely despair at the coverage of this crisis by the BBC - at every step they have supported the banks continued right to fleece the working people of this country, both by financial manipulation during the 'good' times and by taxpayer bailouts during the 'downturn'. I swear, these bankers are laughing hysterically at the stupidity and sheeplike nature of the great British public as they shaft us time after time and then come back for more.

Talk about having their cake and getting to eat it- again and again and again.

As i have mentioned before, the reduction in interest rates is akin to the water being sucked off the beach; a lot of people may get out their buckets and spades and start to try and build their castles again on this wonderful expansive beach that has been created. The floundering fish will be cheap as chips

However, as the interest is sucked out to sea it will soon be overcome by the tidal wave of hyperinflation that will surf its way towards the flat and floundering dunes.

They will all be drowned on these shifting sands.

Strange, that update for 8.30pm was not there when I wrote my post at 8.42pm!

Yet the BBC report I linked to was timed at 16.57pm - comfortably before your original post asking the question.

Will the BBC be highlighting this contradiction to the PM's claims that the UK is better placed than most economies... or will it wait for the polls to close preferring to highlight the base rate cut instead?

Oh, and your update suggesting "But the IMF is also predicting that the performance of the UK will be the worst of the developed economies - which puts more pressure on the Bank of England to explain why it was inappropriate to make such a cut in interest rates rather earlier in the autumn." is also misplaced.

The IMF has made the biggest correction in anticipated output to the UK figures - suggesting that they too have been shocked at the rapid deterioration in the UK's prospects. A change of -1.8% since July 2008 projections for the 2009 year.

It's on page 2 of Chapter 1!

Robert are you still living under the illlusion that the BOE can do anything about controlling inflation rates when ,they simply shoot their arrows and paint the target cock and bull arround them afterwards ,as any sensible confidence tricksterr would do

They will soon include house prices in the "targets"which should bring inflation down by leaps ans bounds [should needs be]
Even Eddie GEORGE the previous governor admitted that the primary target was not inflation but full employment [it just looks good to claim victory for someone elses efforts ,especially when their objections might be in mandarin]

IT just so happened that Chinese ever increasing productivity from, inward dollar investments inhibitted a wide range of export price rises, as the Chinese economy went for VOLUME growth .which the GreAt Gordon and Co took credit for [USING IT AS ONE OF THEIR INNER RINGS ARROUND THE BULLSAYE ]

No wonder they thought "things could only get better "as the Chinese investerrs "assumed house price growth was proof of the consumerrs ability to service the ever increasing outstanding reamortized debt ,including that of governments


In summation , as long as the consumers could and did empty their houses like an ATM with a guilty conscience , the increasing %growth of consumption of imported price stable product would and did reduce the % overall effect of home groan [off balance sheet]inflation .

"The Bank of England has some explaining to do"

If I were you I should start off by ridding yourself of the idea that the MPC decides interest rate policy independently of the government of the day. No matter how many millions of times it's been written that Mr Brown gave independence in the setting of interest rates, he didn't. The entire exercise was no more than a charade attempting to give international money-men the false assurance that there was a serious structural barrier to the economic incompetence for which Labour had a reputation that was richly deserved.

Imagine! A Labour Government voluntarily giving a group of rational intellectuals the opportunity to block even the more ridiculous aspects of its cloud-cuckoo-land populism. You're having a giraffe aren't you?

Until the end of September, the government was in total denial of the seriousness of the economic situation that it had created. Not so Mervyn King, but then King is a competent realist, completely out of kilter with his political masters. He has, from at least as far back as 2004, been giving coded warnings that storm-clouds lay ahead, but what's a man to do when he's dealing with the self-aggrandised intellectual make-weights who make up the present government? Resign? Possibly, but maybe he feared that his successor would be a Brownite apparatchik who'd only make matters worse.

When Brown, Darling et al had spent all of the previous 12 months downplaying all suggestion of impending difficulties, and when the composition of the MPC was controlled by one G Brown, what chance do you think there was of the MPC putting through a major reduction of interest rates at a time that Mr Brown was announcing continually that there wasn't much wrong with where we were?

Anyone looking at Chapter 1 of the IMF report might also like to look at page 17. [Unsuitable/Broken URL removed by Moderator] It shows the Property price 'gap', the estimated increase in property prices for each country from 1997 to 2007 not accounted for by fundamentals in the economy. Again the UK will be seen to have the greatest gap (or as the IMF also calls it, scope for property price falls), much larger than the USA and larger than all other European countries other than Ireland.. Proof that Browns economy, rooted on a feel good factor of booming house prices, was unjustified as the booming house prices were not themselves justified by the fundamentals of the economy. Consequently, the UK has the prospect of suffering greatly from Property price falls to bring property prices back to equilibrium. As property prices fall and negative equity ensues for many, that feel good factor will turn to a feel bad factor.

Please dont keep going on about the Queen!

She is upset, along with the other owners of the world about her dwindling assets. She owns most of the world and therefore is losing the most in percentage terms ( rather than having to shop at Aldi instead of Harrods I mean)

https://portland.indymedia.org/en/2007/10/367571.shtml

Open your eyes and you will hear, taste and touch and smell ( a rat )

Robert...you are just a tad too quick to attack the BoE on this one....they (Mervyn King especially) are the only ones that can walk away from this catastrophe with their heads held high!

You are disengenuious in even trying to attempt to pin this on BoE.

The only one who has some fast talking to do was the previous incumbent of 11 Downing St.....who is now the incumbent of No. 10.

I had a fair amount of respect for you before tonight.....

Shame on you....shame on you!

I am completely disgusted....this is the watershed.

I bet this does not get past the moderators!

Anyone with a smattering of knowledge of economics will realsie to keep rates too high during a credit crisis and an economic downturn is a disaster waiting to happen.

And the pretext of inflation as an excuse for keeping them high is not a runner as the BOE should be forward looking . And the BOE months ago forecast - rightly - that fuel and food inflation will fall.

So they are just another bunch of incompetents.

I say that with no pride - but I forecast on pb,com - in public - we would have a recession. Having lived and worked through 3, it was bleeding obvious.

Not obvious to the BOE...

Time for some highly paid heads to roll: waste of space. Like the FSA.. not fit for purpose...

#20 : BigMickT

"I'm with the Queen on this one... with this financial crisis being as serious as it is, how come no-one saw it coming?"

It's wrong to say no one saw it coming. It's just that anyone who warned about this over the last 10 years has been treated like a heretic - as though they are mentally unstable for failing to recognise that there'd been a sea-change in the way economics worked.

So all but the strongest have just buttoned their beaks, as would just about anyone who's faced with such a barrage of belittlement and hostility. After all, their theories required reason and logic for their support - and reason and logic had long since been discarded as irrelevant by the mainstream.

Why is no-one else interested in demanding the resignation of the Governor of the Bank of England and the members of the MPC?

They have messed up in a gigantic way for a decade or so, but the good and the great must keep their jobs when all around are being made redundant through their actions!

If the Bank's decision turns out to be based on statistical information then the head of the statistics office should also go.

Don't blame politicians that are just amateurs who know nothing themselves but rely on the professionals, like the Governor.

PS what gives with the moderation of this blog.

#34 is already cleared whilst #28 to #33 are still waiting?

BOE haven't a clue on this one. Brown is telling them what to do and he's useless. It must be awful for the governor to have WRITE A LETTER, poor thing, when interest rates are outside tolerance (as they appear to be ALL THE TIME now). Maybe it would be better if he was SACKED when outside tolerance rather than having to write a letter (I can do that very eloquently especially so for his salary!).

Precisely WHO is going to lend / borrow when their jobs / companies are possibly on the line and even the banks don't trust each other, let alone the potential borrowers.

The banks are simply building up their capital base to weather a storm using TAXPAYERS MONEY. They will find every excuse NOT TO LEND and NOT TO PASS ON INTEREST RATE CUT. If they do pass on the interest rate cut, they WILL NOT LEND except to the very wealthy. With fewer loans being doled out, the banks have to increase margins to make a profit. They dare not lend to anyone (like they did), because colateral is dropping in value.

Darling pretends he cannot make banks lend reasonably, just hint at it. NONSENSE the only way to get them to lend reasonably is by ACT OF PARLIAMENT which I would not normally support, but this is all part of a Brown plot to fool taxpayers into meekly footing the bill for CDO's and CDS's which are still out there hanging over our banks. Forced (responsible) lending CAN BE DONE, but that would expose the Govt lie.

This country is right in the BROWN STUFF now.

#11 John_from_Hendon

You now seem to have lost your credibility! (and memory)

King wanted to increase rates in 2005 in order to meet the inflation target wrt RPI.....this is when Gordon stepped in and changed the target to CPI... that conveniently left out the cost of housing.

I would trust an academic over a politician any day of the week......where were you educated?

I can only guess that you are a NuLab supporter with a bit of wonga saved somewhere in a UK bank a/c, but just can't quite bring yourself to have a pop at NuLab.

Don't worry though....it's all about to be inflated out of existence by your precious.

Oh dear...

Looks like the October money supply figures may be a touch lower than expected:

Here's september

https://www.bankofengland.co.uk/statistics/m4/2008/sep/index.htm

BTW....my bet is on KATCHIT in the 2:50 at Wincanton on Saturday.....it's a cert (a banker told me so!)

#35 Excellence first.....Hear, Hear again! (2nd day running!)

Today's unprecedented 1.5% base rate cut was all about the electoral time table and nothing to do with Bank of England independence. Brown ordered the cut, because he wants to win an election next May - it is as simple as that. The pursuant disaster can simply wait until Brown has conned his way back into Government (Heaven forbid).

My post at #36 has been referred to moderators.No swearing, no libel, no copyright infringement - just a highlighting of the difference between the Brown rhetoric and the IMF report wuth a link to the IMF report.

I cannot believe they will, but I wonder why the BBC even need to consider censoring the post?

#34 stilllitterarty

Good stuff! (not sure what it is though....but good stuff anyway!)

Funny as well....boy will we need the the funny stuff to remain sane in the coming 18-36months!

They say the boundary between brilliance and madness is small!

As one trader commented today 'we're really up a gum tree now' - the 1.5% cut tells us that the recession will be far longer and deeper than anyone had anticipated. Remember, they are looking 12 months ahead in setting rates, so the year out view must have deteriorated significantly. Just look at how the markets reacted - down 5-7% in one day since they know what it means. Mervyn King is caught between a rock and a hard place, if he doesn't cut rates he's seen as the economy killer, the fact that he cut by 1.5% means that even by conservative standards, things are going to get bad.

Also the Meryyn King does not run the economy, he's been trying his best to support Gordon and Alastair in their view that we are 'well placed' to ride the bad times, fortunately he has realised sooner rather than later that we need to face reality - Britain is very poorly placed to weather this recession - ask the IMF!!

Robert, you should talk to some of the large industrials. Their view of how bad things are has worsened considerably in the last couple of months. Many of them are now seeing an absolute bloodbath ahead - and they didn't hold that view back in the summer.

Economic conditions - or at least, the perception of them - really have disintegrated that quickly. That's what a collapse of confidence can do, whatever Gordon Brown says about the UK's prospects. And it quickly becomes self-fulfilling.

So the November assessment by the Bank has every reason to be much gloomier than the September view.

Anyone in retail will confirm that the rate of decline in sales has accelereated very quickly from mid-September. Even "recent" economic data is out of date 2 weeks later. There is a lag in corporates reporting and many trading statements report to early October. It's grim out there.

The mild hysteria induced into consumers becomes a self-fulfilling prophecy very quickly in today's media driven age.

The BoE fell for the story as well. How quickly the perception changes, when the facts have been the same for some time.

#41 :John_from_Hendon

"Don't blame politicians that are just amateurs who know nothing themselves but rely on the professionals, like the Governor."

So Brown, Balls, their political advisers and other assorted henchmen spent their time at the Treasury merely putting a bit of political polish on policies put together by the professionals?

Really! I'm unconvinced.

Sure, this is how it should be. But the politicians we insist on having - for the strength of their resolution, presumably - are those who have spent their lives building an impenetrable fence around their dogma. What chance do professionals have of persuading these unpersuadable people? Let's get back some way towards electing people for the breadth of their wisdom, not for the intractable way in which their beliefs are held.

#41

'Don't blame politicians that are just amateurs who know nothing themselves but rely on the professionals, like the Governor.'

Quote 'HMG are responsible for monetary policy and accountability' Vince Cable - Newsnight 6-Nov-08

In law....ignorance does not make them innocent!

'amateurs'.....never has a more true description been applied!........just how old are you?.....I can only guess that you are probably a 2nd year politics and economics degree student!

PS - You'll be able to collect your degree certificate after year 3 from the student union bog (please take two!)

If there is one thing that should be apparent by now it is that most 'experts' including economists know nothing more about forecasting and managing the economy than the average chap in the street.

They are virtually always looking over there shoulders at so called objective statistical data and using that virtually alone in order to construct some expected course for the future. Only when something becomes so obvious nobody misses it do they actually lift there eyes from their papers and declare it's time to go to action.

I'd like to be kind to them,but I cannot.

They are clueless academics and there are no excuses for them to hide behind. People ,including me, with only a fraction of their so called academic qualifications have seen the issues coming for a long time. Why ?. Because we actually look and listen closely to what we see happening in everyday life first and only after that do we look at statistics to see if they confirm our observations.

This is a waste of time. These clowns have been playing the same tune for decades and they're not about to stop now. All that will happen now is they will switch over from whatever flavour of the month economic theory they have been following onto a new one which in the fullness of time will also lead them and us into trouble that could be avoided.

If only life and economics actually worked according to their theories wouldn't it be nice. In their dreams !

Robert

Can you confirm if reports that the government bail-out is at 12% interest is true. If so, one can see why the banks would then not lend it at 4 or 5% to us, since they would make a huge loss. This could also explain their reluctance to raw down these funds.

If they have started cutting earlier, 3% could be the bottom but due to delays it looks like bottom will be reached between 1.5% to 2% range.

Post 42 John from HENDON
"The last shall be first and the first shall be last "

Its cos i is black and comes from Alloahbama ...and i had a dream that all those who suffered unjust moderation would get to the top of brokebuck mountain... and start a whimpy bar
Let freedom ring !

I dreamt of the day when moderated and unmoderated would walk hand in hand into the credit crunch and tell the bankerrs to get stu.....and it matters not the lenght of a mans forsk....etc etc etc

Let freedom ring !

sagamix @ 24

Glad to see you have finally seen the light.

We have a democracy where the talents and abilities required to get in a position to make the decisions is completely the opposite of the talents and abilities required in order to run the economy.

We are slowly but finally approaching the consequences of this anomally.

Are you now willing to accept that G Browns incompetence has a lot to do with the final chapter.

I really could write a book on why the IMF has singled out the UK as being in the worst position to weather the storm and why it is GB that is responsible for us being in this position.

King and most of the MPC have been shown to be totally hopeless in their judgement from naming and shaming NR onwards.

These idiots have cost us all a fortune.

A bunch of ten year olds with a few pins and blindfolds could have done better.

Time to get rid of most of them and install people with intelligence and experience of real business decisions, rather than arrogant academics, with schoolboy mentalities, holding onto discredited academic theories, now wondering no doubt why they didn't get A*'s.

Again Robert you are right. The Bank has got some explaining to do. How can these supossedly genius economists be so wrong with their view on the economy and inflation. Just like how can the Local Authority Treasury managers be so wrong on Icelandic Banks.

I'm just some stupid oik yet both the severe recession and icelandic banks were obvious issues to me way, way before the experts apparently cottoned on.

I'm worried.

The BoE has caved-in to external pressure and given up the fight against inflation.

In the short term inflation will fall thanks to lower energy and commodity costs. But this is temporary and very soon prices will be on the rise again.

With the pound devalued by around 20%, high inflation in the Far-East manufacturing economies and OPEC cutting production, it is inevitable that inflationary pressures will return, particularly once the developing economies start consuming again.

Our present problems came about by the over-inflation of the housing market. Some believe that inflating the rest of the economy to match will solve the problem. The snag is that you'll destroy 30% of the UK economy in the process.

The flip-side of the rate cut.

With a rate of 3% how is is Alistair going to attract the squillions needed from the Arab Royalty to finance his monstrous Government debt?

With the Euro rate at 3.5%, a run on the pound will be Mervyn's next headache, and more expensive imports may hold inflation up.

That's pretty funny. You try blaming the Bank of England to try and deflect attention away from Gordon Brown's mistakes.

It was only a matter of weeks ago when GB was trying to convince us that the UK was well placed to get through this "global"economic downturn. The IMF then explains that actually, the UK is kinda screwed and is likely to shrink by almost 2% in 2009 - not even taking into account the 0.5% decline in the last quarter plus however big a decline we have in the current quarter.

This clearly shows we're not "well placed" in this recession/depression - according to the IMF we're actually the worst off country. This isn't the Bank of England's fault - it's Gordon Brown's.

I'm not a fan of Alistair Darling's but this can't be blamed on him by any stretch of the imagination - this problem was caused by Gordon Brown when he was Chancellor.

I appreciate that you don't want to rock the Labour boat, especially seeing as it's sinking rapidly, but please give credit (or rather blame) where it's due

So am I the only person left in the UK who thinks that cutting interest rates isn't only pointless but harmful? Why do I think so? Because cutting interest rates is meant to encourage borrowing. But borrowing can't happen anyway because there is already far too much personal debt and the source where all this debt has come from is NO LONGER AVAILABLE. Most of all, the debt (700bn GBP net personal debt in the UK) is the reason for all the mess and the last thing we need is more of it. So what does the BOE think it is doing?

#25 in a few words got it right -- as indeed do most of the public blogs. The government should have guaranteed the public's deposits and let the banks -- who were just about insolvent -- go down -- just like the banks do to their own customers in the same position. That way the strongest will survive. Its interesting to consider just how long the passive British society will sit there and allow this to happen. Weeks ago I wrote that the banks were not filtering down the money in the USA and nor would they in the UK -- now it is screaming from every headline. We can all blog in increasing numbers and anger and make ourselves feel better but it will make no difference. Ultimately we can only 'vote' with our feet and protect our own families and businesses as best we can. Remember cash is king. Take your money out of the banks and watch the real panic set in.

The Bank of England like all central banks is clueless. The same people who presided over the evolution of the worst financial fiasco since the great depression are now charged with fixing it. Inflation underrunning projections? How about deflation leading the entire world's economy into depression?

Not going to be populist but here goes.
The debate is becoming increasingly emotive and misguided. Just watched question time and it was striking that everyone seems to be under the same dissillusion.
Lets try and deal in facts, and listed below are some of them:

1) The problems with the UK banking system is not one of reckless imprudent lending. Credit lines have not tightened because of a massive increase in the number of loan defaults by UK borrowers whether that's mortgages or commercial loans. Not yet in any case.

2) The problem with the reduction in credit availaility is down to the almost complete withdrawal of money from the wholesale markets. The reason for this withdrawal, well for the UK Banks a perception that the UK mortgage system is similar to the US system and therefore as equally susceptible to defaults.

3) Mortgage defaults have increased but no where near at the levels to justify a total freeze in the wholesale money markets. But the consequences of the freeze may very well precipitate a sharp rise in defaults. It's the chicken and egg scenario.

4) There is a huge conflict of interest for the government; as a major bank shareholder it should welcome the banks' strategy of increased margins to increase profitability. This will A lead to a rise in share prices and B enable the governement to get the investment payed back sooner at a profit. But it is now making strong calls for banks to lend at 2007 levels and at reduced margins, to curry political favour with the populus.

5) If the BOE had put in place all the liquidity measures, and loan guarantees pre Northern Rock bust, coupled with a loosening of monetary policy, would we have a number of part and fully nationalised banks and the prospect of a deep and prolonged recession? If the answer is no then they have clearly made huge errors. It's not like they could not see this coming, sub prime blew up as early as late 2006, this train wreck has been on a collision course for a long time.

"This really matters - because the Bank of England's success for a decade after 1997 in controlling inflation and providing a firm foundation for stable economic growth stemmed in part from its credibility."

So, more broadcasting from the Ministry of Truth !! It is about on par with some shaman saying that he had been successfully making the sun rise everyday !!

The real fact of the matter is that, for the past 10-15 years, Britain had been *EXPORTING* inflation via the cheap goods that it imported from the Far East.

The very gadgets used by *all* in this "blog" have stayed stable in price despite massive increases in power, capabilities and capacities in obedience to Moore's Law !! Moblie phones/MP3 players/PDAs/sat-nav/cameras have also become cheaper even as their abilities have risen !! *ALL* of them are manufactured in the Far East !!

Primark, Matalan and those one-quid shops have done their part in keeping inflation exported !!

The *ONE* inflationary factor that was NOT exported is the very thing that the government cunningly and obstinately kept off the CPI - house prices !!

Prior to this mess, the BofE had *some* effect in controlling the inter-bank rate. It had *NO* effect in controlling inflation. In fact, it helped increase *real* inflation by encouraging the house price increases !!

And the government wallowed in their cunning plan while they squandered all the international goodwill built up by Britain during its Empire days !! The (former) Empire's perception that "British is Best" is now so eroded and devalued that it is now a sick joke !!

The only thing Britain has now that is of value to foreigners is its knowledge base (universities and other seats of learning) and the skill-sets of *some* of its people.

The much touted financial services have now been shown to be a massive Ponsi scheme !!

From now on, Britain will have to work harder at exporting *real* skills (not the dumbed down versions) in order to recover from this recession. Aside from specialist (i.e. small to tiny) manufacturers, British manufacturing is insufficient to keep Britain fed, clothed and warm for more than one quarter. Farm production may help stretch it for another six months if we are very lucky.

Therefore, Britain is totally dependent on money from abroad, whether in terms of dividends and returns on investments or from the selling of knowledge and skills, to keep Britain going !!

The sooner this is acknowledged, the sooner Britain will get out of this recession. Threats of Communist-style impositions and confiscations and lawlessness in the streets will only drive away what little chances Britain has in any recovery.

#16 Sorry to be so pedantic but that are now lots of things in the shops that are NOT *Made in China* !!

Latest reports (some from personal sources) say that the great mass manufacturing centre of China, the Pearl River Delta (Guangzhou, Dongguan, Shenzhen, etc.) are seeing a frightening migration of low level manufacturing to cheaper countries like Vietnam, Cambodia and Indonesia !!

Even Chinese labour is pricing itself out of the low level mass manufacturing (e.g. toys, knick-knacks, T-shirts, etc.). All their survivors are moving up the manufacturing food chain as fast as they can to avoid being crush by the rising cost of raw materials and labour, on the one hand, and falling export orders, on the other.

Manufacturing Darwinism is alive and well in the Pearl River Delta !! "Innovate and improve or die !" is now their battle-cry !!

Meanwhile, back at the ranch, complacency reigns supreme in Britain !!

#67 Get real !! Will this government allow any bank within its heartland fail without trying every populist trick first ??

Look at NR !! All the actions were populist and not about commercial reality !! They were done simply to buy votes. Of the two schemes put forward to "save" it, one was by the hedge funds trying to get as much as possible out of the government for what they knew were worthless assets. The other, by the Virgin consortium, was shot down in flames by the Commissars for not being ideologically pure !!

So, with great fanfare, the government "lent" a huge amount of money to NR only to discover that that money could not be repaid no matter what the government did. So, quietly and with as much stealth as possible, the government nationalised that bank !! I.e. kicked out the shareholders without as much as a "by your leave" and pretended to be a commercial bank while still sprouting Socialist populist propaganda about lending regardless.

What NR is doing now makes a mockery of all that propaganda. It is now kicking out any mortgage that it thinks is toxic and "encouraging" those people to get their mortgage elsewhere !! Strange actions for a (purportedly Socialised) bank !!

#55 Now, now !! That's rather unkind !! Economics students should, at least, be able to collect their certificates from the students' union bar that they frequent the most !!

#54 That system that you advocate is known as Meritocracy and it is a deadly enemy of the current Social Democracy prevalent in the Western world.

The nearest example to what you advocate that I can think of is Singapore. They don't seem to be doing too badly either !!

#53 "Anyone in retail will confirm that the rate of decline in sales has accelereated very quickly from mid-September."

I can't agree with your statement in its entireity. Aldi, Lidl, Primark, etc. seemed to be doing very well, thank you !! My local one-quid shop is doing a roaring trade.

Meanwhile, staff at the local "fashion house" are gainfully employed guessing when it will close down !!

Reality has chomped down hard and its bite is extremely painful.

#40 "So all but the strongest have just buttoned their beaks, as would just about anyone who's faced with such a barrage of belittlement and hostility"

Alternatively, they can seek lucrative employment in friendlier climes, earn enough to pay off their mortgage and sit back and watch the antics of headless chickens dashing around while sipping a Singapore Sling !!

Actually, WE do have some say in this. There's is list of all the mutual building societies remaining on the Building Societies Association website. These societies do not have shareholders to 'satisfy'. Also, there are credit unions in many parts of the UK, sample type of principle.

As of this week, I'm leaving HBOS (after twenty years) and doing my banking with one of the bigger mutuals, probably Nationwide. I'm an advocate of financial reform anyway (LETS, alternative currencies etc.) so I'm putting my money where my mouth is.

If a significant number of other people start doing this, we'll see some changes in attitude as custom drops away. We do need banking but not necessarily via the profit-obsessed major banks.

In 2000 I heard from Ann Pettifer (Jubilee 2000) about the american bank that had lost 3 trillion dollars in lending to poorer countries, (the gross national product of China was 1 trillion dollars then).
The head of the American reserve Harold Greenspaun? informed the banking industry across the world they had to bail out this small bank.
Is it possible if he had not made this decision that the banking crisis worldwide would not have happened. As Jubilee 2000 raised the issue of banks lending to third world countries to build projects they did not always need and leaving them with debts they could not pay it reduced.
It seemed to me that banks then looked at home markets by sub-prime lending saddling the poorest residents in USA and the UK with huge debts debts.
This was made worse as the reduction of affordable housing meant that the only way many people could get a home was to obtain an expensive mortgage.
If only our government had put some of the billions given to northern Rock etc; into the local Authorities they could have built the affordable homes and kept the economy moving. Plus keeping people employed across all trades.

What's changed in two months? Well, the BoE's mandate, for starters. Something about allowing that 2% to be fudged.

Very Interesting
What a dilemma the political/financial establishment is in. On the one hand we have spent the last ten years at least feeding off and spending other peoples cheap money. This, as every one knows, has caused a massive asset inflation which is now busy reversing.

If we turn the tap off now everything will collapse. So the Bank of England cuts its base rate to try and get people or businesses borrowing again.A bit like pouring petrol on a fire!

On the other hand when you have gone on a spending binge you really should stop borrowing and pay back your loans.In fact you should encourage people to save so that you are not dependent on those nasty overseas money lenders.However that needs higher interest rates to make it worthwhile.

So far the Bank has decided to make it easier to let us go on borrowing by cutting rates,but it cannot last. It cannot last because the country is probably broke,apart from our declining North Sea Oil.It is a pain limitation exercise.

The UK earns 30% of its income from "financial services". That particular industry is in intensive care and likely to stay there. It would therefor seem that we have no chance of paying our way for the medium term at least.

Overseas money lenders will have worked this out and will not be very interested in lending to us unless we pay them a high rate of interest, but we just cut the rate.

So economy broken and not profitable, and interest rates not up to much. Result withdraw money from UK Ltd,the pound exchange rate falls, internal inflation rises.

The B of E must therefor turn to the UK saver to provide the money that they have to borrow.

Who would want to bother to save at the pathetic rate of interest now indicated by the base rate? No one.

How to make saving more attractive without deflating too fast?

I think Barak Obama showed the way with his fundraising, a few dollars from millions of people rather than lots of dollars from a few people. Preferably through the internet where costs can be reduced to nearly nil rather than the current complex paper trail if you wish to invest at the moment.

The solution is to increase the TAX FREE rate of return on National savings and Premium bonds so that it comfortably beats inflation and it becomes worth saving again.Some sort of index linked plus return (a real index mind you) would do it

Get 60,000,000 people saving with a decent return and they just might do it rather than borrowing.

Mind you HMG will hate this because it will force them to cut back on the bloated stae machine that is wasting all our money.

One thing is sure, Johnny foreigner is not going to pick up the tab!

Posted at 07:18 AM | Permalink

The 1930s depression was prolonged because interest rates were slow to come down, and was only solved in the end by government spending (albeit on war).

Might the BoE and government not be doing the right things?

It is at times like this that thae UK should be thankful that we do not have a manufacturing base.

So instead of empty factories rotting away we will have a enormous bank (excuse the pun) of empty office space that can be turned into emergency social housing.

For the millions out of work, the transition from employment to unemployment will be for easier than the last resession as all they will have to swap is one comfy chair and a PC to their living room chair and PC - they can then continue to play the same old computer games as in the office, but not use our money to gamble with.

#44. BankSlickerminustheR

wrote:
King wanted to increase rates in 2005 in order to meet the inflation target with RPI But he didn't.

Exactly my point the Bank of England ceased to have much credibility years ago.

But the most important point is the difference between the bank's position a month ago and that now. This is why the Governor should consider his position.

This is the major credibility deficit. How come the forecast by the Bank was so wrong a month ago? If it was not wrong they must have already known that the economic situation was dire a month ago. If they did know that then why did they no do something about it then?

This means that either they are totally incompetent at forecasting or they were deliberately deceitful.

Either way, if this was a 'real' business and it came out with such a volte-face the chairman would have very serious questions to answer and the shareholder would probably ask for his/her resignation.

The Bank is a major part of the problem and it must reform and that includes a radical change in staff.

Please explain why the Governor should be somehow exempt from quite valid criticism?

#54, ExcellenceFirst

wrote:

So Brown, Balls, their political advisers and other assorted henchmen spent their time at the Treasury merely putting a bit of political polish on policies put together by the professionals.

The key here is the term "professionals". If the Permanent Secretary and his underlings had real professionalism about them they would have resigned rather than apply and advise ministers in the way that they did that caused the credit bubble.

These so called professionals (really themselves amateurs that are switched between administrative jobs every year or so.) understood what they were doing they would have at least listened to those independent advisers who pointed out that absurdly high multiples of income used to determine mortgage values would, if unchecked, destroy the whole economic infrastructure of the Nation - as has happened.

In earlier times there was a limitation of the amount of credit available in the country. This limit served to keep a check on bubbles and it is a no-brainer to notice that if there are no limits, or mechanisms to limit then there will be a gigantic bubble, particularly when the banks operate in a protected cartel.

My point about politicians being amateurs at actually doing anything is surely indisputable, particularly given that most have done nothing else in the careers than be politicians.

The chief advisers must take a good part of the blame.

Does anyone know how far asset depreciation will go?

At what point does somrthing become a buy from a sell?

The reason I ask is that if the Banks need to make a profit by lending to people that can afford to pay it back in a world where people are struggling to pay back their existing committments - does this mean that assets will fall and banks will fail causing assets to fall further until a total collapse?

Iv'e made an equation

E=mc2

just what is the point of all these "experts" to a man the BOE commitee did not see the current crisis coming, everyday we are regaled with statistics "better" or "worse" than expected. The so called economic experts rode the wave of success of the boom years when even my mother could have run the economy.......the housing experts who did not see the price drop, the financial experts did not see the recession coming, the banking experts bought debt (in fact they had no idea what they were buying), the energy experts never saw the rise and fall of the oil price, even the weather experts got it wrong (long hot summer?) And the greates financial expert of them all, Gordon Brown who ended boom and bust with the biggest bust of all time! So why do we even bother with them.....i guess we just need someone to blame when it all goes wrong.

#55 BankSlickerminustheR

Quote 'HMG are responsible for monetary policy and accountability' Vince Cable - Newsnight 6-Nov-08

Just because Vince Cable said something it does not make it right. You can't call the government amateurs but the opposition not. It is logically inconsistent. Just because one party is in power and the other not, does not suddenly make this years party members the professionals and next year's, after an election, amateurs.

The professional advisers have a professional responsibility. This seems to be something that you do not wish to accept. Just because you are given an order you are not absolved from the responsibility of carrying it out.

The chief adviser should all go because they are professional and should realise that they share the responsibility. And in this case where the Governor and the MPC has been given (a degree - perhaps nominal) independence than they should most definitely go.

Interest rates and the volume of credit.

Think about the results of the interest rate cut and why the Bank of England set itself up for a fall, for a moment.

In the last decade commercial banks found ways of running their business that created vast quantities of credit ('toxic' money) and they in consequence could remain and been increase their profitability. Leaving aside that this was the cause of the bubble economy and credit crunch.

Now if commercial banks can no longer create money in the way that they did and that interest rates have been cut drastically is it not the case that to maintain profitability commercial banks cannot cut their interest rates? Or at least if the do they will become loss making. This is why, notwithstanding squeezing savers (which itself is problematic as it is one of the few sources of money) the commercial banks will not be able to follow the Bank of England's lead.

So if they aren't selling any Houses, what happens to the Building companies ?

Do they just fold, ie go bust ?

Or do they get Nationalzied like the Banks?

So why would people buy Housebuilder Shares?

When those companies won't be able to pay a dividend or even make a profit for many years to come ?

Mortgages aren't being made available.

Interest rates are being cut by only a few Banks.

And LTV is down to less than 90% estimated value!

A long way to go yet !

Robert, I know you would prefer the agenda, but it should be incumbent upon you to explain to everyone why WE ARE GOING TO RUN OUT of essential supplies because shipping has all but ceased.

Nothing is moving because they can not get lines of credit to cover transit. It is the next part of the implosion before the unwinding of the CDS's has even finished

Peter Kerr-Dineen, chairman of Howe Robinson shipbrokers, said: "The scale of change in rate is utterly staggering – the market has come down from super-boom territory to pretty close to bust, effectively in two months

"If the problem is not resolved, there will be no way in which even the sharply revised economic growth forecasts for 2009 will be met, because without normal trade economies cannot function. Ultimately, flour mills will run out of wheat and power stations will run out of coal," he said.

I can still recall the 3 day week. The power cuts and the candles - the food shortages and the inflation

Thats where we are headed again

As usual there are many contributions here that speak good sense.

I do feel that we are moving to a new stage of events - people are very angry at what is happening and want change.

Brown is incompetent and his previous comments on the status of the economy highlight this. The question is how to get rid of him and his court of fools (politicians/business soothsayers).

At each plot twist we all pick over the facts in despair and incredulity ... but we need to get to root causes and take action.

I think we need constitutional change and more accountability - in the states people can go to prison for these activities.

I think part of the problem is the Bof E were not listening to the siren voices in the summer saying we needed to cut rates to maintain the economy. It was clear in July that commodities were coming off their peaks and that would impact inflation in 2009.

However the key problem, I believe, is that we have a three headed Hydra in control of our economy - Brown/Darling, BofE and the FSA. So who is really in control?

Whilst the economy is swimming along nicely this works because it's light hand on the tiller. But if the boat is capsizing, as was the case last year, no one was in full command. Belatedly Mr G Brown has now taken charge but what took him so long? The system of controlling the economy needs a thorough overhaul.

Basically . no one knows how bad it will be, the net result will be a factor of business confidence or happiness and spending patterns. Three months ago we were faced with rising inflation and a stagnant economy... stagflation, then it was a fear of cutting interets rates slowly to curb inflation,..... now inflation be dammed, lets try and stimulate the economy, so its a bit topsy turvy out there and questions like yours Robert only serve to increase the paranoia in the country. The Govt are doing there best in the face of Global body blows and the minute we all start behaving postively is the minute we become sensible adults (admittedly it needs the Banking community to not be so avaricious)

The latest rate cut is a response to the lack of consumer confidence and an attempt to stimulate demand, the nearest I can get to this is the Japanese Economy in the nineties when no amount of interest rate reductions could stimulate the economy, what it took was a concerted shift in National Confidence.
I will start to worry when the Govt issue 'Happy Vouchers' like the Japanese, we are not there yet, so if we behave sensibly we will get through this, the media have to start reporting sensibly also.

There are signs, Robert, that even you are getting caught in the negative hype....

"19. At 8:13pm on 06 Nov 2008, glanafon wrote:

Why is it assumed that the BoE has been 'successful' in controlling inflation in the last 11 years."

Well, it's easy. You just take anything which increases in price out of the figures... You redefine inflation as "core inflation". That is inflation without inflating things.

Face it.

Our politicians are corrupt. Our financial leaders are swindlers.

Dear Robert,
The only Organisations that are out of Touch in this crisis is the Government and the {banks} Economists are expecting a schrink drop of 2% in 2009, way above that banded around at this stage. A further drop in house prices to around 33%, and a major fall in employment.
The IMF and and the European Banks expect Britain to be hit very hard in this down turn,
AND if this Happene it will be the Fault of the British Banks, who are hoarding Tax Payers money to recoup their losses. it time to have all the CEO's address a the Treasury Finance Select Committee of the House of Commons and the Lords.

So house prices were too high, tell us something we didn't know. We knew it would end in tears.

Now the IMF says GB will face the worst of this global recession/depression then the rest. Again, we know.

I remember what Marx wrote about Britain being the first place where the revolution starts. As it's the oldest capitalist economy it will face newer challenges (or something like that).

As usual Peston is bleating as if he alone has x-ray eyes that can see to the heart of a very complex issue. From the start of his coverage of the financial crisis his alarmism has what one would expect from one of the tabloids.

Peston doesn't seem to have a handle on the crisis any more than the BOE, so can he please remove his own ego from his reporting?

It is easy to criticise.

The one different characteristic about this so-called recession and the others I have experienced is the speed and to the depth that market conditions are changing.

I anticipated a market crash in October: I did not expect major banks to rupture, some to be nationalised and others to get taxpayer funding.

I have gradually come to the conclusion that we are in for hard pouding in the months and years ahead. I have long feared the prospect of a slump but have always discounted this as ancestral caledonian gloom. Now it would seem, to continue the metaphor, we are all doomed!

It is not good enough to shoot the messenger. We need to deal with the cause. Over to you Mr.Brown.

MERV AND THE GANG AT THE BANK OF ENGLAND LOST ALL CREDIBILITY WITH ME WHEN I WROTE TO THEM REGARDING PETITIONING FOR WINDING UP HALIFAX PLC IN 2006/7.

THE B OF E SAID WINDING UP THE HALIFAX PLC HAD NOTHING TO DO WITH THEM???


GUESS THEY TAKE THAT ATTITUDE TO ALL DEALINGS RE THE BANKS & THE ECONOMY.

WHICH EXPLAINS EVERYTHING. . . .?