JCT: I found it
just so typical that a Labour party of workers
like the new British government would choose to make its first order
of business to abjectly surrender all control of the economy to their
masters, the bankers.
19970507 page a11
U.K GIVES CENTRAL BANK FREEDOM TO SET RATES
by Mark Gilbert, Bloomberg News
MG: Most radical change for Bank of England
in its 303-year history
LONDON - Four days after taking office, Chancellor of the Exchequer
Gordon Brown unexpectedly surrendered control of U.K. interest rates
to the Bank of England yesterday, sparking the biggest one-day rally
in British bonds in five years.
JCT: Big Money is giving Labour a standing ovation for this one.
MG: The move by the new Labour government,
which the chancellor said
was the most radical internal change at the Bank of England in its
303-year history, came after Mr. Brown opted to raise Britain's base
rate by a quarter point to 6.25 percent.
JCT: Big Money are always happy with higher interest rates.
MG: Investors applauded the move to let
the central bank set its base
JCT: Applause for a government that's promised to leave the
nation's loansharks alone. What loanshark wouldn't stand in ovation of
this group of working people's representatives?
MG: the rate at which it lends cash to
commercial banks, and which
acts as a floor for U.K. commercial and retail interest rates - to
balance the rates of inflation and economic growth.
JCT: The Big Lie rationalization appears for the first time. The
Big Lie is that inflation is the inverse function of the interest rate
such that raising interest reduces inflation. Inflation is actually
the direct function of the interest rate such that raising interest
costs forces manufacturers to pass along those increased costs to the
consumer in higher prices. But to explain why people must suffer
interest rates, the Big Lie that it fights inflation always seems to
do the trick.
MG: "We knew Labour policy was to move
toward independence, but this
does it virtually in one go," said James Barty, a Deutsche Morgan
Grenfell economist. "The chancellor caught the markets on the hop."
JCT: It looked like they were already moving towards acquiescence
to the loansharks' desires but having the government totally cave in
was certainly reason for wild celebration for all us citizens who own
bonds. Actually, for all them citizens who own bonds. I wonder how
many LETSers own enough bonds to be also applauding the rising
interest rates the Labour Government has washed its hands of trying to
MG: By giving the task of setting rates
to a yet-to-be-selected nine-
member policy-making council at the central bank, as is done in most
industrialized countries, the government has helped take politics out
of an important component of economic management.
JCT: When he says "as is done in most industrialized countries,"
this sad state of affairs may be true but just because most industrial
countries are acting stupidly doesn't mean it's a good idea for
everyone to act stupidly. "All other countries let their loansharks
set the loanshark rate, we should too?" Just because letting the
loansharks run the show, as in all industrial countries, is going on,
does not mean it's smart.
We always hear this "government not to be trusted with government
money" argument when the problem is "private bankers not to be trusted
with government money." Actually, there hasn't been a government that
has controlled its money system, other than the Island of Guernsey and
various Argentinian States, for the notion to be tested. It hasn't
been governments irresponsibly spending, it's been governments
irresponsibly borrowing from loansharks money they could be creating
themselves. All this really means is that the guys who've been running
the British money system all along are having their power even more
entrenched from popular control.
MG: It also serves to insulate elected
officials from interest-rate
increases that may be needed to slow inflation
JCT: They're going to hit Britain with higher usury charges and
they have to keep relying on the same big lie over and over to pull it
MG: but tend to retard economic growth,
raise home mortgage and
credit-card debt rates, and have other usually unpopular consequences.
JCT: That's right. The consequences of believing the Big Lie that
interest lowers inflation is all those unpopular consequences.
MG: "It will be so much easier for (Bank
of England Governor) Eddie
George to get interest rates implemented," said Paul Gay, an economist
at Portman Asset Management which controls $1.6 billion U.S. of bonds.
JCT: It's quite right that it will now be that much easier for
the loansharks to get their interest rates implemented.
MG: "The result should be an attempt by
the Bank of England to stamp
JCT: Again, the Big Lie that interest rates help stamp out
inflation is repeated. It's the only, and best, lie they've got.
MG: The rate increase, unlike the decision
to let the Bank of England
set monetary policy, was expected after the government said the
economy grew at a faster-than-forecast annual rate of three percent in
the first quarter and workers' average take-home pay rose at a five
percent rate in February.
JCT: The Big Lie repeated a fourth time. Interest rate increase
because growing economy and rising workers' pay is inflationary and
need interest rates.
MG: Both figures suggested that the so-called
underlying rate of
inflation - retail prices minus mortgage interest payments - may not
meet the government's 2.5 percent target.
JCT: They measure inflation by subtracting the rise in prices
caused by the interest rates and considering only the rise in prices
caused by everything else. It's a lot easier to blame price rises on
workers pays rather than their own loanshark fees if they don't
include the loanshark fees in their computation of inflation, isn't
MG: It was a 2.7 percent annual rate in
March, down from 2.9 percent
in February. The rate of increase was "widely expected for months,
said Gerard Lyons, the chief economist at DKB International.
JCT: Of course, since it was widely expected, it must have been
expected because everybody expected it was necessary. Of course,
they've all gone to the same school of Economics which teaches that
interest reduces inflation. And most actually have been brain-washed
into believing it.
MG: Former chancellor Kenneth Clark last
raised the base rate in
October, also by a quarter-point Because the increase was expected,
companies said the pound is unlikely to rise enough to further crimp
exports by making U.K. goods more expensive abroad.
JCT: So because it was expected, they don't expect the rates to
do too much harm. The only good news in the article.
a comment to John Turmel