This is the headline on and excellent piece by Andrew Lilico who runs the biggest bond fund in the world. Its well worth close study. BoE independence was granted by Brown so we could enter the Euro says Mr Lilico. That was the spin but it was not the reason. Brown wanted inflation to be some one else's problem. Simples! Then no blame could be attached to GB when inflation took off and politically worse interest rates went up.
The Treasury then setlled old scores with the Bank taking away gilt edged issuance which it had done for 300 years. GB also removed its banking regulation function to the FSA and we all know what a great success that was. He later compounded his mistakes by ordering the Bank to sell off half our gold reserves. We got a knock down price of $275 per ounce.
The idea that central bank independence was a great way to control inflation was an attempt to copy the Bundesbank's success. Misses the point. The BU was backed by the super efficient German manufacturing economy and thats where the low inflation came from. Blair's cool Brittania was backed by Costa Coffee etc.
The BoE has a sorry record over the last 5 years of missed inflation targets and also missed significant structural changes in the economy. Lilico's thesis is that if we put politicians back in control we can always boot them out. True but may not result in improved perormance. Still, having worked under the autocratic rule of MAK its worth a try.
I do hope we get a good appointee as Governor. To the best of my knowledge unlike the C of E there are no old Etonians in the frame.
No comments:
Post a Comment