Just a quick thought on the decision (as I have read it) to allow banks to have lower reserve rates.

I like Carney, but I pity the man.

He is once again boxed into a position where he has to make risky decisions because Conservative politicians will not face the truth that the only safe way out of recession is (aside from ignoring the Leave vote!) fiscal stimulus.

As almost all economists would agree, austerity is contractionary particularly at the zero-lower bound. So when a chancellor refuses to stimulate the economy with increased government spending, the governor of the Bank of England is stuck having to make extreme monetary policy decisions. With more QE possibly already on the way, this new option is being floated to allow banks to lend more than they should in order to encourage spending.

Good lord.

The only significant action the UK took to mitigate another banking crisis like 2008 was to force banks to keep more reserves. No prosecutions, no one held to account, no separation of the domestic and investment banking systems. Nothing… except raiding the ratio of reserves to risk.

And now even that is getting reversed.

The captain has been sacked but he’s still sailing the ship with his blind fold on.

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s