Tuesday, April 28, 2009

Does this look like a sensible, coherent and thought out policy?

Or does it look like panic? The MPC must have lost its collective mind, cutting the bank rate to almost zero.

1 comment:

  1. There's a comment in Jay's book Sterling in which he insists the purpose of raising interest rates is to cool an overheating economy.

    The Brown/Greenspan belief that careful manipulation of the interest rate in quarter point shifts could and should be used to control inflation within a (low) target range was both overconfident and misconceived, and missed this fundamental use of interest rates.

    Of course, it is in the interest of central bankers to have the currency gently inflate at 2% or so a year, to the detriment of savers, while the gold in their vaults retains its intrinsic value, and maybe increases substantially in cash value. The stupidity of that low interest rate policy, as the root of all the highly leveraged activities of the last ten years, messed up the world economy.

    There has been no sensible interest policy since the early 90's recession.

    B. in C.