The Daily Mail reports Interest rates: How keeping them at a record low is a deliberate government ploy to pay off its debts: A stealth raid by the Bank of England has stripped savers of more than £170billion, a Money Mail investigation can reveal. By slashing the base rate to a […]
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Leverage and the Bank of England
In his speech yesterday, potential Governor of the Bank of England Paul Tucker discussed moral hazard, agency problems, short-termism and the “manifestly false” assumptions of risk models. I almost feel prophetic. He also said: When credit markets become overly exuberant, not only do the balance sheets of lenders become stretched, […]
Read MoreLow rates and the damage they are doing to the economy and society
Via Another “Operation Twist” will cause more damage to the economy » The Cobden Centre, Frank Shostak explains the damage that will be done by further credit market interventions: Last week the US central bank has announced that it will expand its “Operation Twist” program to extend the maturities of […]
Read MoreGordon Kerr predicts the failure of the Greek bailout
My Cobden Centre and Cobden Partners colleague Gordon Kerr appeared this morning on Bloomberg to explain why the Greek bailout will fail: As I have said in debate, in the context of using the IMF to facilitate bailouts: …If this is not the time of all times to question the […]
Read MoreThree flaws in the Financial Services Bill
Under the heading, Osborne looks to limit damage of ‘credit busts’, the FT gives a neat summary of the Chancellor’s plans. In particular: He said the FPC would also look out for dangerous linkages in the financial system and identify exotic new instruments that might undermine stability. It would be […]
Read MoreHayek’s neglected truths about credit, capital and the trade cycle
Last night, I caught up with Martin Wolf’s November programmes for Radio 4 Analysis, which you can find here. He offered a predictable blend of commentators calling for more money printing, world central banking and greater global governance. It prompted me to look out Monetary Theory and the Trade Cycle […]
Read MoreCredit expansion and the trade cycle
Via XX. INTEREST, CREDIT EXPANSION, AND THE TRADE CYCLE – – Mises Institute, which I recommend in full, old advice on our present situation: The wavelike movement affecting the economic system, the recurrence of periods of boom which are followed by periods of depression, is the unavoidable outcome of the attempts, […]
Read MoreInflation Must End in a Slump – Mises Institute
It was briefly fashionable to admit that interest rates were too low for too long, leading to a boom built on expansionist monetary policy. Unfortunately (related link my own): Economic theory has demonstrated in an irrefutable way that a prosperity created by an expansionist monetary and credit policy is illusory […]
Read MoreThe Causes of the Economic Crisis (1931)
From an address by Ludwig von Mises in 1931, published in The Causes of the Economic Crisis and Other Essays Before and After the Great Depression (PDF) (emphasis mine): According to the circulation credit theory (monetary theory of the trade cycle), cyclical changes in business conditions stem from attempts to reduce […]
Read MoreCredit – Frederic Bastiat – Mises Institute
Via the Mises Institute, a little Bastiat demonstrating how little is new under the sun: In all times, but more especially of late years, attempts have been made to extend wealth by the extension of credit. I believe it is no exaggeration to say, that since the revolution of February, the […]
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