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Speech in the debate on the Budget Resolutions

On 22 March, I took the opportunity to speak in the debate on the Budget Resolutions. The Hansard record is below (emphasis mine): Mr Steve Baker (Wycombe) (Con): I rise to support the Budget and, in particular, to welcome the Government’s supply-side reforms. This has been a dramatic Budget, and I would be failing the Government if I did not concentrate on the areas of drama. First, on the disability reforms, the challenge before the Government is clear: to deliver a policy […]

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The ECB’s bond-buying programme – “a grave menace to our civilisation”?

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The European Central Bank has announced a programme of bond-buying of €60 billion a month, to be carried out at least until end-Sept 2016. Monetary policy around the world remains in the midst of a remarkable experiment: money creation is expected sustainably to solve real economic problems. It is possible that there is something dangerously wrong with mainstream economic thought. Hayek’s conclusion to The Pure Theory of Capital is a spectacular rant against those economists who consider only the short-run, surface […]

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Speech on Money Creation and Society

A lady in Wycombe recently asked me the following questions: Why is my house valued higher than its worth? Why do crashes keep happening every 8 years? Who owns the money supply and how does it relate to gold? Why haven’t I had cost of living pay rise for 7 years yet the CEO has just bought a pacific island? Why do quarterly targets keep going up at work and what is the end game of this model? Why has […]

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Understanding the Money Creation and Society Debate

Together with colleagues spanning four parties – Michael Meacher (Lab), Caroline Lucas (Green), Douglas Carswell (UKIP) and David Davis (Con) – I have secured a debate on Money Creation and Society for Thursday 20 November. Here’s a quick guide to understanding the debate. First, we have a system of paper or “fiat” money: it exists due to legal mandate as opposed to being a physical commodity like gold. Reserves, notes and coins are created by the state but claims on money […]

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Keynes, Carney and the corruption of capitalism

We’ve come a long way since the Bank of England’s Andy Haldane pointed out that they had “intentionally blown the biggest government bond bubble in history” and that it constituted the biggest risk to financial stability. Yesterday, in his Sky News interview, the Bank’s Governor Mark Carney said that the housing market was the biggest risk to financial stability. Selected headlines from the recent press continue the story: U.K. House Prices Rise to Record High in April – “U.K. house prices hit […]

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House price inflation and the madness of monetary socialism

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Via House price inflation should be capped at 5pc, RICS says – Telegraph, House prices should be prevented from rising by more than 5pc a year to stop another bubble destabilising the economy, a top property institute has urged. For comparison, the UK inflation target is 2%. The RICS story is here. With excessive price growth and high mortgage lending having led to a vulnerable banking sector, specific policy on limiting growth is needed. Such a policy could be implemented […]

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Monetary activism must end in a slump

On Friday, I spoke against monetary activism once again, complaining about the use of expectation management and new monetary instruments in an attempt to defibrillate the economy. It’s a mistake, not least because a failure to contain inflationary expectations could be catastrophic, as I set out last year. Mark Carney understands the argument that monetary activism will cause a damaging “intertemporal misallocation of capital” but he chooses to believe wise intervention elsewhere can compensate. I am sure this is wrong. […]

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A confession from the Governor?

In his Cardiff speech last night, Sir Mervyn King admitted the Bank of England’s short term policies “appear diametrically opposed to those needed in the long term.”Sir Mervyn still believes that ulta-low interest rates have prevented the recession becoming a depression. However he confessed that such low interest rates prevent bad investments from the boom years unwinding and prop up failing firms surviving on cheap credit, thus postponing the recovery. I could point out that I have been saying this for years. Although that […]

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The limits to monetary activism are being acknowledged

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Via Bank of England’s money printing is putting UK economy at risk – Telegraph: In its annual report, the Swiss-based Bank for International Settlements (BIS) warned that artificially low rates and inflated asset prices could also be holding back growth by masking lenders’ bad debts and deterring them from cleaning up their balance sheets. “Prolonged and aggressive monetary accommodation may delay the return to a self-sustaining recovery,” BIS said. “It can undermine the perceived need to deal with banks’ impaired […]

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Two videos celebrating 15 years of the Monetary Policy Committee

SaveOurSavers are celebrating 15 years of the Monetary Policy Committee with the following video. It’s rather too harsh on the Governor: effective central planning of the price of money is just as impossible as the planning of other prices and surely more counterproductive. That is, the Monetary Policy Committee are trying to do something which cannot be done. The video below from Dominic Frisby goes to the heart of the matter: our system of inflationary money which is loaned into […]

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