In response to an FT article by Chris Giles on 19th May 2016, entitled 'BoE's Vlieghe calls for Brexit rate cuts'
Please Note: This comment isn't about the EU referendum, 'in' or 'out' - it's about central banking.
'He (Gertjan Vlieghe) thinks the level of interest rates needed to keep the economy on an even keel has declined sharply in recent years. “Interest rates are low because that is what the economy needs,” he said'
Splendid. Very reassuring. All we need to do, in order to 'keep the economy on an even keel' is to follow the advice of an adherent of the 'economics' that got us to where we are today. Here is a brief reminder of how we got here today, for those of us like Mr. Vlieghe, who are afflicted with a poor memory:
'Ten Steps to Monetary Heaven':
1. Become a total 'wow' with the pols by blowing a housing bubble...by enabling cheap credit and encouraging banks to provide mortgages to anyone who can fog a mirror
2. Notice something more interesting to look at whilst the banks slice and dice the mortgages taken out by the aforementioned mirror foggers; and go to lunch whilst the rating agencies give them triple A
3. Deny there is a bubble
4. Ignore anyone who insists that there is a bubble
5. Anyone who is too persistent or too loud can be dismissed as a crank or an Austrian, except for Professor Steve Keen, who's an Australian - don't worry, near enough
6. Pretend to be as shocked as almost everyone else when the Ponzi scheme collapses - talk about a 'once in a gazillion years event', even though the tech bubble burst only 8 years earlier
7. Lie to the queen when she asks if anyone saw it coming - don't mention the Austrians, and on no account say the words 'Steve Keen'
8. Print 'loadsamoney', and make sure the richest members of society get the benefit from it. Lower interest rates as far as possible without appearing too desperate - 0.5% sounds about right
9. When 1 to 8 don't work because carts don't pull horses and water doesn’t flow uphill, announce that 'These features of the modern UK economy “might persist for years, even decades”' (* see note 1)
10. Lower interest rates and prepare the ground to start babbling about how well the BoJ and the ECB are doing with negative rates…and pray
* Note 1 – There is a vicious rumour that 'these features of the modern UK economy' WILL persist whilst the economy is being run by institutionalised groupies who don't have a clue how the economy works. Ignore this rumour, but keep your PhD with you at all times.