Fed Up – February 18th 2017

If you were going to set up an organisation to help control and regulate the economy and the banking system how would you start? Would you employ over 1,000 Ivy League trained economists, many with PhDs, but little or no practical knowledge of running businesses? Would your board of governors come from the same background and would the owners of the organisation be the very bankers that you were duty bound to regulate? I somehow doubt it. But even if you were so minded would you then allow untested economic theories to be implemented without a thorough study of the potential consequences of zero or even negative interest rates on the real economy or the massive inflation of your balance sheet by the purchase of trillions of dollars’ worth of government debt? No, you wouldn’t, but welcome to the world that is the Federal Reserve System of the United States. Nine years into the recovery from the Great Financial Crisis and the Fed is still wondering why its policies are not working as intended. Their theory goes that if you lower interest rates, companies will be happy to borrow and invest in their businesses as consumers, who begin to feel the wealth effect of rising property and stock prices, pick up their spending levels. Several problems…

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The end of the beginning – July 8th 2016

“We are continually faced by great opportunities brilliantly disguised as insoluble problems”. Lee Iacocca Having been in Spain for the last fortnight I count myself lucky to have been away from the gnashing and wailing; and let’s be clear that I am not talking about the footie, a competition that has always been a disappointment for England (but let’s hear it for Wales) and, for me, a metaphor for the EU and all its secretive machinations that drive a coach and horses through the democratic process; witness this week’s quote from Francois Hollande, “the City, which thanks to the EU, was able to handle clearing operations for the eurozone, will not be able to do them,” he said. “It can serve as an example for those who seek the end of Europe … It can serve as a lesson.” At the end of the day the democratic decision of the British people is to leave the indubitably undemocratic EU; so how to grasp the great opportunity with which we have been presented? Trade agreements will of course be high on the agenda and the quicker this process starts the better. Comments from the more rabid EU bureaucrats, Juncker et al, suggest that some form of punishment is required “pour encourager les autres.” There is however something of a mellower tone from Germany where…