Does The Bank Of England Know What They Are Doing?

One issue that has struck me throughout the financial crisis (i.e. since August 2007) is the relative ineptness of policy and control of the economy.

The Bank of England and FSA did not see the disaster coming, when it did happen, they did not know what to do. then they sort of said sorry, then they did something, now they are doing more.

Yet ‘doing something’ has turned out to be a path aiming to take us back to 2007, i.e. the peak of the asset bubble. To achieve this they are trying to buy assets through Quantitative Easing and hloding interest rates low to stimulate lending.

All of this has huge potential to stir up another asset bubble the next few years. At least this time I will know what is about to happen and can plan accordingly.

However, the BOE’s statement of last week was quite breathtaking. In it, they said they saw upside and downside risks to their current strategy. In effect, they don’t know what will happen, but they are trying anyway, following Friedman’s ideas of Monetary policy.

This is a truly bad state of affairs as it seems to me that the Government is trying Keynes, the BOE Freidman. One of them will be wrong and that will cause another economic catastrophe.

If the BOE is right, then we avoid a 1930’s depression and merely get ‘Lost’ decade. If the Government are right, we get a depression and huge deficits. Yeesh.

Roll on 2020. Glad I am still on the beach!

Subscribe by RSS Subscribe by Email