Posted in Prices/Inflation

Euroland’s Utopian foundations shaken by its central bank shirking its duties

European_Central_Bank_-_building_under_construction_-_Frankfurt_-_Germany_-_14The late-night decision on 4 February by the European Central Bank to reject Greek bank collateral for monetary policy operations will, I confidently predict, precipitate not just a run on Greek banks; not just greater price instability across the Eurozone – but ultimately, the collapse of the fantastic machinery that is the ‘self-regulating’ economy of the Eurozone.

As is well known, the primary duty of the ECB is to promote price stability. Subject to price stability it has a duty to promote the union’s Treaty objectives that include:

balanced economic growth… full employment, social progress and solidarity amongst member states.

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With ballooning debt and oversized banks, another financial crash isn’t far off

Banking trade screensIn election Britain this last week has been consumed with business and finance, mainly the hedge funds, lambasting Labour for being ‘anti-business’, as though massive indulgence in tax avoidance and continued insistence on de-regulation of finance were the conditional requirements of a successful global economy. Actually they are the forerunners of the next financial collapse which may be sooner than many people anticipate. Consider the evidence. Continue reading →

Osborne learns to his cost that private markets don’t oblige

Osborne light bulbIt’s really rich that Osborne has tweeted: “Vital this (drop in the oil price) is passed on to families at petrol pumps, through utility bills and air fares”. He’s spent the last 5 years lambasting Labour in support of the Tory free market mantra that the State should get out of the way and leave it all to the markets. Now rather pathetically he’s pleading with market operators to show a dose of fair play rather than exploit a windfall for their own interests which is the natural instinct of capitalism. Continue reading →

Economic recovery failing working people

cashIn 2010, the Tories promised to make work pay. Today, they are hailing the economic recovery, growth revised up and record numbers of people in employment. The economy is certainly working for those at the top. A top rate income tax cut has coincided with the return of bankers bonuses and above inflation increases in executive pay which means they are now paid 140 times the wages of their average employees. However, the recovery has yet to be reflected in workers’ pay packets, and while more jobs are being created the vast majority are insecure, low paid, and part time. Continue reading →

The downward spiral: private debt rising, wages, productivity & inflation falling

Agony by Mark Turnauckas CC BY 2.0The Bank of England’s Andy Haldane is a fine economist. He occupies an ideology-free zone. This is highly unusual in central bank circles. He made a particularly skilful and nuanced speech last week. Many gushed over it. Gillian Tett of the Financial Times suggested that it was good enough to qualify Haldane as a journalist.

But Haldane is not a journalist. He is a central banker. And that makes his ‘Twin Peaks’ speech particularly ominous. For while he bows to his political masters in the Treasury by acknowledging the growth in UK employment, his speech tilts definitively towards gloom. Let’s analyse it more carefully than I was able to do in a brief BBC Newsnight interview (eleven minutes into the show). Continue reading →