On November 27, 2023, the Economic Affairs Committee of the British House of Lords completed their inquiry into the question – Bank of England: how is independence working? – by releasing their 1st Report after taking evidence for several months – Making an independent Bank of England work better. The report is interesting because it contains a confusing array of contrary notions. On the one hand, the witnesses to the Inquiry claimed it was “Groupthink” in operation that prevented the Bank from raising rates earlier and that it was obvious the inflationary pressures were traditional excess spending driven by excessive monetary supply growth (classic Monetarism). That assessment is contested by the alternative, which I adhere to, that the inflationary pressures were supply driven and not amenable to interest rate shifts. And the Groupthink arises because these economists consider interest rate changes would solve the inflation irrespective of the contributing factors. While the Report is sympathetic to the mainstream view as above, it then launches into a critique of the mainstream forecasting approaches. A confusing array of notions....William Mitchell — Modern Monetary Theory
British House of Lords inquiry into the Bank of England’s performance is a confusing array of contrary notions
Bill Mitchell | Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at University of Newcastle, NSW, Australia
After what has just happened in Australia and now the House Of Lords regarding both central banks.
ReplyDeleteThe one party nation state are clearing the decks to get ready to introduce fiscal councils.
The liberal left Simon Wren Lewis and Jonathan Portes and the banking economists on the right have been pushing for fiscal councils for at least a decade.
https://academic.oup.com/economicpolicy/article-abstract/26/68/649/2918377?login=false
An unelected, unaccountable and hand picked few that will decide fiscal policy. All riddled with the same GROUPTHINK of the central banks.
So that fully sovereign nation states are put in a set of chains equivalent to those spending rules written in the EU treaties.
So even if you vote to leave the EU they trap you anyway. Starmer will be the guy to deliver it. Fiscal councils will be one of the first things he does. As he tries to get the UK back into the EU.
US politicians will never relinquish that power….
ReplyDelete“ That assessment is contested by the alternative, which I adhere to, that the inflationary pressures were supply driven and not amenable to interest rate shifts.”
ReplyDeleteMixed MMT messaging….
MMT out there claiming rate increases creating “inflation”…
While economy decelerates:
https://www.atlantafed.org/cqer/research/gdpnow
“ The GDPNow model estimate for real GDP growth (seasonally adjusted annual rate) in the fourth quarter of 2023 is 1.2 percent on December 1, down from 1.8 percent on November 30. “
Trending towards a negative Q4 while interest income is all time highs…
There’s a lot more to it than interest income…. There’s a lot more to Finance and Accounting than “adding and subtracting!” too….
"MMT out there claiming rate increases creating “inflation”…"
ReplyDeleteThey *created* inflation. If you give people new money they will spend it - particularly when prices are going up.
That's crystal clear, for example, from the divergence between the UK PPI and the Japanese PPI as the monetary policies diverged.
However if some other spending is going into investment goods and services then you increase the supply side to catch up - particularly if you can lean on the reserve currency and export the resulting pressure and unemployment to countries that peg their currency to yours.
Eventually though the damage from high interest rates starts to show. Interest rates will slow an economy down, in the same way that amputating your leg will cure an ingrowing toenail.
“ Eventually though the damage from high interest rates starts to show.”
ReplyDeleteWe might be at that point now…
Footsoldier writes, “The one party nation state are clearing the decks to get ready to introduce fiscal councils. An unelected, unaccountable and hand-picked few will decide fiscal policy. All riddled with the same GROUPTHINK of the central banks.
ReplyDeleteSo that fully sovereign nation states are put in a set of chains equivalent to those spending rules written in the EU treaties.
So even if you vote to leave the EU they trap you anyway. Starmer will be the guy to deliver it. Fiscal councils will be one of the first things he does as he tries to get the UK back into the EU.
Yes, British elites are still furious about Brexit. Of course, a fiscal council can only advise Parliament, and will not have actual power. But yes, Labour leader Keir Starmer wants the UK to once again be under the heel of Brussels and Frankfurt.
If Starmer ever gets into power, he will use the lie that the UK government must balance its budget, as though a monetarily sovereign entity that creates infinite money out of thin air is the same as a private business that cannot.
As though the UK government, which uses the pound sterling, is the same as the twenty European nations that use the euro. Six of those twenty states have their own fiscal councils, which I suppose makes sense, but a fiscal council for the UK is a political stunt. (Just like it is for Australia.) Such a council will claim that unless the UK once again becomes subordinate to the EU, retirement pensions will have to be slashed, and taxes will have to be further increased.
The sad thing is that many British peasants will actually believe this shyte.