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The injustice of easy money is going mainstream

By Steve Baker
Aug-14-2013
Politics
3 Comments.

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 record low of 0.5?per cent and allowing the cost of living to soar for more than four years, the Bank has whittled away the value of cash sitting in High […]

Tags: Banking, Central Banking, Credit, debt, economics, SaveOurSavers

Leverage and the Bank of England

By Steve Baker
Oct-18-2012
Politics
2 Comments.

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, cheap credit leads borrowers to become over indebted, raising the probability of default. When defaults eventually pick up, a general awakening occurs, triggering mass deleveraging. So close to the monetary […]

Tags: Bank of England, Banking, Central Banking, Credit, economics

Low 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 assets on its balance sheet and also said it stands ready to take further action to put unemployed Americans back to work. The US central bank will prolong the program […]

Tags: Banking, Credit, economics, Money, Socialism, Swaps

Gordon Kerr predicts the failure of the Greek bailout

By Steve Baker
Feb-21-2012
Politics
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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 fundamental basis of our financial system, I do not know when we ever shall. … To conclude, we are in danger of simply kicking a can down the road and, […]

Tags: Bailout, Credit, economics, Greece, interventionism, Video

Three flaws in the Financial Services Bill

By Steve Baker
Feb-8-2012
Politics
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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 charged with containing credit booms as well as limiting the damage of “credit busts”. Which this morning caused me to regret that I was not given time in the Commons […]

Tags: Accounting, Banking, Central Banking, Credit, economics, IFRS, Money, Moral Hazard, Parliament, Video

Hayek’s neglected truths about credit, capital and the trade cycle

By Steve Baker
Jan-7-2012
Business, Politics
Comments Off on Hayek’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 (1933). Hayek wrote (emphasis mine): It is a curious fact that the general disinclination to explain the past boom by monetary factors has been quickly replaced by an even greater […]

Tags: Credit, Economic Cycle, economics, Hayek, Keynes, Money, Wolf

Credit 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, repeated again and again, to lower the gross market rate of interest by means of credit expansion. There is no means of avoiding the final collapse of a boom brought […]

Tags: Austrian School, Credit, economics, Money

Inflation Must End in a Slump – Mises Institute

By Steve Baker
Jun-3-2011
Business, Politics
Comments Off on Inflation 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 and must end in a slump, an economic crisis. It has happened again and again in the past, and it will happen in the future, too. If one wants to […]

Tags: Banks, Credit, economics, Finance, Inflation, Market Intervention, Mises

The 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 artificially the interest rates on loans through measures of banking policy—expansion of bank credit by the issue or creation of additional fiduciary media (that is banknotes and/or checking deposits not […]

Tags: Banking, Credit, economics, interventionism, Mises

Credit – Frederic Bastiat – Mises Institute

By Steve Baker
Dec-9-2009
Politics
Comments Off on Credit – 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 Parisian presses have issued more than 10,000 pamphlets, crying up this solution of the social problem. The only basis, alas, of this solution, is an optical delusion — if, indeed, […]

Tags: Bastiat, Credit, economics, Socialism

Tag Archives: Credit

The injustice of easy money is going mainstream

Leverage and the Bank of England

Low rates and the damage they are doing to the economy and society

Gordon Kerr predicts the failure of the Greek bailout

Three flaws in the Financial Services Bill

Hayek’s neglected truths about credit, capital and the trade cycle

Credit expansion and the trade cycle

Inflation Must End in a Slump – Mises Institute

The Causes of the Economic Crisis (1931)

Credit – Frederic Bastiat – Mises Institute

Liberty – for peace and prosperity

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