Thursday, 3 May 2012

Merv rewtites history and wee George gets shafted

It was interesting to hear a BBC correspondent say that when you spoke to ex-BoE staff you got a different story to the one MAK was peddling last night on the Radio 4. As an ex-BoE man I remember raising concerns pre 2007 on bank lending and the asset price bubble. Shut up was the message that came back. Things are going fine and we don't want to rock the boat.

The crucial factor was when the Northern Rock queues round the block hit the TV news GB was deciding on re-appointing King or getting a new Governor. In these circumstances King was keeping quiet and GB did not want to be seen firing his central bank Governor during a financial crisis. Faced with a real difficult decision GB did what all politicians do, choose the easy option. King was re-appointed and the rest is history which MAK is now trying to re-write. Paul Tucker, the favourite to be next Governor, if the papers are to be believed went along with the King line to the end.

Now it seems MAK has seen the light, fallen out with Ed Balls which is not difficult, but also taken to slagging of bankers. Its well known MAK was never happy talking to bankers but get one thing straight there is only one organisation in the UK that can manufacture money and hence generate an asset price bubble and its called the Bank of England. It could and should all have been nipped in the bud in 2006/7 by jacking up interest rates and increasing the capital adequacy requirements by disallowing  dodgy collateral like Italian and Greek bonds the  BoE  was taking in its refinancing, liquidity supplying, money ops.

As every schoolboy knows too much money chasing too few goods like houses generates price inflation. Prof King has a lot to answer for!

I see wee George attracted the ire of the Franco Prussian EU finance commissioner M Barnier yestreen with his proposal to allow national regulators to increase capital requirements for its own banks. M Barnier described this according to the FT as,  '“permanent flexibility, opting out”. “It is not a question of appearing ridiculous but a question of credibility,” he said. “The commission is in charge of the [single] market.”

Well there you have it. Distrust between the City and \brussels increase at what is a blatant attempt to promote Paris and Frankfurt at the expense of the City of London. Wee George's big donors all inhabit the City so he is between a rock and a hard place.

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