Political boffin, keen fisherman looking forward to retirement.

Wednesday, March 21, 2007

Bank of England and Government Began Debt Crisis on Purpose

If anyone needs any confirmation on the cynical dealings of this Chancellor and the Bank of England look no further than the admission of the former Governor of the BoE, Eddie George, that the Monetary Policy Committee deliberately created the fiscal climate for hyper inflation in the housing market and record unsecured debt.

The reasoning is quite obvious, a few years into the newly elected New Labour Government, the UK economy faced recession which was the commonplace in the rest of the Eurozone and the US. Needless to say a recession within the first few years of a newly elected Labour government would have been disastrous for the party.

In a cynical move to boost consumer spending, the Bank of England clearly led by the Treasury, dropped interests rates to stimulate mortgage and credit card borrowing. There was a double whammy of course as property prices rocketed, house owners eager to access equity in their homes borrowed and hence spent more.

Before Labour apologists start harping on about the ‘independence of the Bank of England’ the whole scam was compounded by the decision of the Treasury to change the way inflation was calculated from a more broad based formula to one based on consumer prices. This means that official 'inflation' in the UK has remained low which has sustained lower interest rates and fuelled the borrowing frenzy.

The result is clearly unsustainable, personal unsecured borrowing in the UK is remarkably over £3 trillion. House prices are totally out of proportion – with first time buyers priced out of the market.

It really has been a case of haves and have nots under Labour. There has been wealth redistribution, but from people without property to those lucky enough to own their own homes.

Just goes to show the skewed priorities of Labour – most people in the UK are up to their neck in debt, yet city bonuses have reached record levels.

Correction in the economy is inevitable, inflation is currently on the rise and interest rates will have to follow. The Chancellor knows the economy is living on borrowed time, especially since things aren’t looking to clever across the Atlantic. No wonder he’s in such a rush to get to number 10.


spartacus said...

Just shows what a scandalous and cowardly decision it was by our 'next' prime minister to give up controls on interest rates 10 years ago doesnt it! As for eddie george well what can you expect from someone like him? Do you think him and his fellow champagne quaffers in the city give a damn about the misery disgraceful things like this cause to millions of ordinary people in britain? The sooner we nationalise the banks and the building societies the better! Housing should be a right not a source of big fat profits for the few!

Ted Jones said...

Something has to be done. The growing wealth inequalities we have witnessed under Labour is scandalous. Labour's latest gambit is to introduce regional pay structures for the public sector -specifically for court workers. If this is rolled out across the public sector it would have a disastrous effect on the Welsh economy.