Guest Post: Ralph Musgrave — Britain’s finance minister and central bank chief at loggerheads

Britain’s finance minister and central bank chief at loggerheads.


George Osborne, Britain’s finance minister introduced a scheme to boost house purchases called “Help to Buy”. And not content with that house price bubble inflating stroke of genius, he introduced another scheme called “Funding for Lending” which aims to encourage lending in general, but which in fact is being exploited on a large scale by landlords wishing to purchase new properties.

Net result: a rapidly inflating house price bubble.

Funding for Lending

But all is not lost:

Mark Carney, the new Bank of England chief says he is ready to stamp on any house price bubble.

So now you know the definition of the phrase “public official”. It’s someone who spends their time nullifying the activities of another public official, with you paying the salary of both.

But more seriously, whence this strange desire to get commercial banks to lend, especially when we’ve just had a credit crunch followed by five years of disgracefully high unemployment and all sparked off by excessive and irresponsible lending?

Well it’s all down to something MMTers understand, but which few of those in power understand (especially Rogoff, Reinhart, and the IMF and OECD). It’s the fact that deficits and national debts are nothing to worry about. Or in the words of Keynes: “Look after unemployment, and the budget will look after itself”.

So those in power are desperate to find a form of stimulus which doesn’t increase the deficit, and commercial bank lending fits the bill, as does QE. As to the fact that excessive lending results in house price bubbles and possibly another crunch, well who cares? And as for the fact that QE enriches the rich and destabilises developing economies, well s*d that. The only important consideration is getting that dreaded deficit down.

Ralph Musgrave