Any other business

Our terrified central bankers have sat on interest rates long enough

Plus: Corbyn and the City; the fall, rise and fall of Redcar steel; and your responses on non-execs and the Living Wage

26 September 2015

8:00 AM

26 September 2015

8:00 AM

When news broke last Thursday evening that the US Federal Reserve had decided to keep interest rates on hold, I happened to be surrounded by serious economists representing a range of viewpoints and nationalities. None seemed surprised by the decision, though the media had declared it to be on a knife edge. But I did sense disappointment, not so much because the assembled sages thought technical data pointed to a rise but because the whole will-they-won’t-they saga of the first US rate rise since December 2008 (or March 2009 in the case of UK rates set by the Monetary Policy Committee) now feels as if it has dragged on far too long.

Despite some off-piste remarks by Bank of England economist Andy Haldane to the effect that rates might actually have to be cut again to protect the UK’s recovery if other parts of the world go haywire, the general expectation (including, we gather, in the governor’s parlour) is that rates will start rising, in small increments, by early next year at the latest but will remain low by historic standards even in this new phase, reaching no more than 2 per cent by 2018. Given that scenario, a quarter-point rise this autumn would have no shock value; it would merely signal that a return to monetary ‘normality’ is at last on the agenda.

But by deferring again and again, central banks want us to understand that they are still more worried about deflation, debt levels, China and the eurozone than most western citizen-consumers seem to be. Behind that, I think today’s central bankers are terrified of leading markets in ways that history might judge to have been wrong — as former Fed chairman Alan Greenspan’s cheap-money era is now judged — while today’s investors just want cheap money and have learned to bluff the rate-setters, by threatening to panic, into keeping it that way. If I was a member of the MPC, I hope I’d have the bottle to align myself with Ian McCafferty, the CBI economic adviser who for the past two months has been the only one to vote for a rise.

No meeting of minds


Wouldn’t ya just love to be a fly on the wall at briefings offered by TheCityUK lobby group and the City of London Corporation for Jeremy Corbyn and John McDonnell ‘to help inform their policymaking’ — which on first indication could include a financial transactions tax, a windfall tax on banks and a 60 per cent income-tax rate.
I suggest the City team recruits the irrepressible Lord (Digby) Jones to do his celebrated ‘Who pays for government? We do!’ rap about the private sector generating the profits that create the jobs that generate the tax revenues that pay for the public sector and its follies. Will there be a meeting of minds? Of course not. Does it matter? Not really — because on current showing, Corbyn and his shadow chancellor are more likely to be working as Uber drivers by 2020 than planning a revolutionary budget.

Going cold again

Back in April 2012, I celebrated the relighting of the blast furnace at Redcar, once Europe’s largest, under the ownership of Sahaviriya Steel Industries — which was planning to ship slab to rolling mills in Thailand to make car bodies and white goods. SSI bought the plant from Tata of India, which had left it cold for two years having acquired it as part of Corus, the residue of privatised British Steel. ‘Steelmaking in this country had long seemed set on a path of terminal shrinkage, overwhelmed by globalisation,’ I wrote, but SSI’s arrival (and new Tata investment in South Wales) offered new hope. Sadly no longer: the Teesside plant is on the brink of insolvency, with 3,000 jobs at risk, and the government has refused a loan to keep it going; Tata is also retrenching. This kind of heavy industry just isn’t us any more, even though we still have adjacent pockets of manufacturing excellence in the automotive and aerospace sectors: in a way it’s surprising British steelmaking has lasted as long as it has.

Tell me more

I’m always interested in your opinions, especially when they agree with mine. This response to my recent item about corporate governance came from a famous name with 40 years’ boardroom experience: ‘It’s really extraordinary that we have allowed this nonsense to flourish with, as you say, only one beneficiary: the headhunter. Hiring in chairmen and chief executives sends all the wrong signals to investors, namely that there’s no one in the company whom the board judges to be competent to hold those appointments. And it sends the demoralising message to staff that, however competent they may be, they’ll never attain the two most senior positions in the company. In fact the chairman and chief executive should not only know the company’s business inside out but also its people: the grafters and creators, the slackers and phonies.

‘And another unhealthy, not to say idiotic, modern notion is that boards of directors function better when they’re adversarial. It’s a biological fact that you let your friends down last of all, but when executives feel that they are not trusted or supported they become secretive — that’s when the trouble starts. I would rather have died than embarrass my non-execs, and that was the best discipline I could ask for.’

I’m also happy to be told when I’ve missed a key point. This came from the chair of a small rural charity that delivers cooked meals to old people in their own homes: ‘I take your points [last week] regarding the effects of the Living Wage overall, but you omitted to mention small charities. The government has not taken our situation into account. Grants for core funding are already hard to source and the first tranche of the Living Wage will add £6,000 to our staff costs. If the voluntary sector is to continue to help maintain the elderly in their own homes and out of expensive care homes, where’s that extra money supposed to come from?’ Keep the comments coming, to martin@spectator.co.uk.

Got something to add? Join the discussion and comment below.

You might disagree with half of it, but you’ll enjoy reading all of it. Try your first 10 weeks for just $10


Show comments
  • The Mayor of Trumpton

    There is a thin chance of a rate rise early next year. But they are more likely to fall to zero. Osborne has now borrowed an extra. £68 billion, unemployment has risen for 5 months, far too many are in low wage dead end jobs. Commodity prices are down 30%, oil is down 52%. The game boom crowed about for the same if the election is back to a very definite bust.

    • TrulyDisqusted

      But house prices are up! Hurrah!

      Think of all those non banking job providing industries that won’t need to concern themselves with the living wage because they’ll cease to exist when almost everyone is forced to spend every penny they earn on housing, heating and eating!

      If there are any entrepreneurial new arrivals out there? I’ve got an almost new plastic shed (10 x12ft) available for the bargain price of £832.46 per week with enough land to incorporate an external (6 x 4) business opportunity (+ £396.29 per week, but may sell separately) because I’m glad to help and I am Not a racist….. although I sometimes fly the St George’s Flag from my bedroom window sill in conjunction with new nationalistic Mars™ confectionary product launches… or when the UAF or their Labour MPs are canvassing!

      Isn’t the economy doing GREAT!

      • Allow me to _show you a genuine way to earn a lot of extra money by finishing basic tasks from your house for few short hours a day — See more info by visiting >MY*&___(DISQUS)*%___ID)

  • WFB56

    Its interesting that there are only two comments on a column that discusses something of importance to everyone, interest rates, whereas on the “pig” story there are hundreds. I’m not sure what this tells us, but whatever it is, it isn’t good.

  • Mark_ld

    The Central Bankers lead a corrupt, incenstious, socialist system that penalises the sensible, honest,long-term’ism and benefits the financial industry, recklessness, cronyism and speculators. There are not enough Articles on sound money which people do not realise is possibly one, or if not the most important issue of the last fifty Years. Current Central Bankers are literally destroying people’s lives much worst than many Wars have done.

  • “Our terrified central bankers have sat on interest rates long enough”

    All the major central banks (Federal Reserve, Bank of England, European Central Bank, and Bank of Japan) are following the same low interest rates economic sabotage policy, effectively (1) on the supply side, preventing capital formation for new highly capitalized business ventures that depend on loans for start up, since the interest rate on the loan, as ultimately determined by a central bank’s interest rates, is too low to cover the large capital expenditure; and (2) on the demand side, there can be no demand for the commodities from such aforementioned investments, because people aren’t saving for such long-term investments, because the lure for such investments, higher, market-based, interest rates are non-existent, thanks to central banks’ low interest rate policies; this is where recession/depressions make their appearance, since there is no demand for the mis-allocated central bank induced fake “investments”.

    The deleterious effects of low interest rates are apparent to those who rely on interest payment dividends from a Certificate of Deposit to supplement a major proportion of every day living expenses. As the interest rate declines on longer maturing CDs to abysmally low levels, many are forced out of CDs because the dividend of the longer maturing CD is no longer covering the living expenses it once did, and consumers need the principal now. Others transfer to shorter maturity CDs, just in case the principal is needed.

    This results in less capital available for business projects that require relatively longer time periods to begin to pay back bank loans.

    This sabotage policy is directed by Marxists within the central banks, who are placed into their positions at the central banks by their Marxist co-opted political parties.*

    The following is a discovery I made in May regarding the fake collapse of the USSR…

    When Soviet citizens were liberated from 74 years of Marxist horror on December 26, 1991 there were ZERO celebrations throughout the USSR, proving (1) the “collapse” of the USSR was a strategic ruse; and (2) the political parties of the West were already co-opted by Marxists, otherwise the USSR (and East Bloc nations) couldn’t have gotten away with the ruse.

    In fact, there would have been no though of even attempting such a ruse in the first place, since its failure was guaranteed, UNLESS the political parties of the West were already co-opted by Marxists.

    The West will form new political parties where candidates are vetted for Marxist ideology, the use of the polygraph to be an important tool for such vetting. Then the West can finally liberate the globe of vanguard Communism.

    For more on this discovery, see my blog…

    https://sites.google.com/site/deanjackson60/home

    ————————–

    *The failed socialist inspired and controlled pan-European revolutions that swept the continent in 1848 thought Marxists and socialists a powerful lesson, that lesson being they couldn’t win overtly, so they adopted the tactic of infiltration of the West’s political parties/institutions. In the case of the United States…(continue reading at DNotice)…

    https://sites.google.com/site/deanjackson60/now-you-see-me-now-you-don-t

    Now you know why not one political party in the West requested verification of the collapse of the USSR, and the media failed to alert your attention to this fact, including the “alternative” media. When determining whether the “former” USSR is complying with arms control treaties, what does the United States do to confirm compliance? Right, the United States sends into the “former” USSR investigative teams to VERIFY compliance, yet when it’s the fate of the West that’s at stake should the collapse of the USSR be a ruse, what does the United States do to confirm the collapse? Nothing!

    The fraudulent “collapse” of the USSR (and East Bloc) couldn’t have been pulled off until both political parties in the United States (and political parties elsewhere in the West) were co-opted by Marxists, which explains why verification of the “collapse” was never undertaken by the West, such verification being (1) a natural administrative procedure (since the USSR wasn’t occupied by Western military forces); and (2) necessary for the survival of the West. Recall President Reagan’s favorite phrase, “Trust, but verify”.

    It gets worse–the “freed” Soviets and West also never (1) de-Communized the Soviet Armed Forces of its Communist Party officer corps, which was 90% officered by Communist Party members; and (2) arrested/de-mobilized the 6-million vigilantes that assisted the Soviet Union’s Ministry of the Interior and police control the populations of the larger cities during the period of “Perestroika” (1986-1991)!

    There can be no collapse of the USSR (or East Bloc nations) without…

    Verification, De-Communization and De-mobilization.

    The West never verified the collapse of the USSR because no collapse occurred, since if a real collapse had occurred the West would have verified it, since the survival of the West depends on verification. Conversely, this proves that the political parties of the West were co-opted by Marxists long before the fraudulent collapse of the USSR, since the survival of the West depends on verification.

    The above means that the so-called “War on Terror” is an operation being carried out by the Marxist co-opted governments of the West in alliance with the USSR and other Communist nations, the purpose being to (1) destroy the prominence of the West in the eyes of the world, where the West is seen (i) invading nations without cause; (ii) causing chaos around the globe; and (iii) killing over one-million civilians and boasting of torture; (2) close off non-Russian supplies of oil for export, thereby increasing the price of oil, the higher price allowing oil exporting Russia to maintain economic stability while she modernizes and increases her military forces; (3) destroy the United States Armed Forces via the never-ending “War on Terror”; the ultimate purpose of the aforementioned to (4) bring about the demise of the United States in the world, opening up a political void to be filled by a new pan-national entity composed of Europe and Russia (replacing the European Union), a union “From the Atlantic to Vladivostok”; which will (5) see the end of NATO.

    Now you know how Bolshevik Russia survived in 1917; how the West “lost” China to the Communists in 1949; why the Eisenhower administration turned a deaf ear to the anti-Communist Hungarian uprising in 1956; why the Eisenhower administration in 1959 was indifferent to the Castro brothers’ Communist fidelity, actually used the CIA to overthrow the Batista government; why the Nixon administration abandoned Taiwan for Communist China, and signed treaties/provided economic aid to the USSR; why the Nixon administration refused to tell the American People that over 50% of North Vietnamese NVA regiments were actually Chinese People’s Liberation Army soldiers (attired in NVA uniforms, and proving that the Sino/Soviet Split was a ruse, as KGB defector Major Anatoliy Golitsyn told the West back in 1962), thereby (1) ensuring the Vietnam War would be lost; (2) destroying the prominence of the United States abroad and at home; (3) breeding distrust between the American people and their government; and (4) securing Communist victories in Southeast Asia. Working in the background within the political parties of the United States and Great Britain were Marxist agents doing their best to (1) ensure the survival of Communist nations when they popped up; and (2) sabotage any policies that would bring down a Communist nation. That’s why after the fake collapses of the East Bloc nations and USSR there was no mandatory Western verification process to ensure the Communists weren’t still in control.

  • Jonathan Tedd

    If you want a really good concise honest account of where we are as an economy I recommend Tim Morgan’s surplus energy blog.

    The UK’s debt-based consumption economy is a road to ruin. C4 news from a new shopping mall in Brum last night as if this is the future. No – it is most certainly NOT.

    Central banks have caused all this. Monetary policy committee? What is this but a another soviet style device?

Close