Why central banking doesn’t work

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I ran a Fun Online Poll and 43% agreed that the BoE’s MPC should be scrapped (click my name for more). In the course of this I learned that the Official Base Rate was – until about a year ago* – more or less the same as Three Month (Sterling) LIBOR.Since when the MPC have been pushing string/pulling elastic like topsy, to little avail, of course.

Hi all,Do we “really” want banking and supply of money, to be left to the free market?Best,Yourihttp://globalviewtoday.blogspot.com/

Youri:“Do we “really” want banking and supply of money, to be left to the free market?”Yes.Political control of the money supply simply results in the boom and bust of the business cycle as interest rates lose their function as the regulator of investment and savings. Instead they are used by govt’s for political considerations. The result is malinvestment on a massive scale and the inevitablilty of recessions – necessary to extirpate the waste of the boom.To clarify: the current downturn is the result of govt intervention – specifically price regulation thru the manipulation of interest rates by the BoE, NOT the free market.

Hi Not an Economist,Sorry I missed a chance to reply earlier. But, I think the market deciding prices, as is, is bad enough. The greed in the market is what gave us the over-inflated asset prices, which led to the bubble, which led to the crash, which is causing a wrong and painful correction–if not stopped, NOW, we can have it all over again in less than 5 years. The Central Bank is not at fault, aside from giving the false premise that it could control prices, with the conflicting mandate it had in regards to rates and price stabilization. I just put up an article on Mr. Sentance’s report on my blog!Best,Yourihttp://globalviewtoday.blogspot.com/

Youri,It’s not the greed of the market that causes asset price bubbles, but inflation of the money supply, which is entirely the fault of central banks and financial regulators (and, as I guess Not An Economist might add, the “fractional-reserve banking system.”)Put simply, increases in the money supply don’t affect consumer-prices first, and cannot simply raise them evenly. Instead, the new money has to be invested somewhere: either in shares or in houses.Since 2003 the B of E has been increasing the money supply by 10%-15% a year (B of E’s own figures). The result has been house price inflation of… surprise, surprise… 10%-15% a year.Free market money would not do this.

I ran a Fun Online Poll and 43% agreed that the BoE’s MPC should be scrapped (click my name for more). In the course of this I learned that the Official Base Rate was – until about a year ago* – more or less the same as Three Month (Sterling) LIBOR.Since when the MPC have been pushing string/pulling elastic like topsy, to little avail, of course.

Hi all,Do we “really” want banking and supply of money, to be left to the free market?Best,Yourihttp://globalviewtoday.blogspot.com/

Youri:“Do we “really” want banking and supply of money, to be left to the free market?”Yes.Political control of the money supply simply results in the boom and bust of the business cycle as interest rates lose their function as the regulator of investment and savings. Instead they are used by govt’s for political considerations. The result is malinvestment on a massive scale and the inevitablilty of recessions – necessary to extirpate the waste of the boom.To clarify: the current downturn is the result of govt intervention – specifically price regulation thru the manipulation of interest rates by the BoE, NOT the free market.

Hi Not an Economist,Sorry I missed a chance to reply earlier. But, I think the market deciding prices, as is, is bad enough. The greed in the market is what gave us the over-inflated asset prices, which led to the bubble, which led to the crash, which is causing a wrong and painful correction–if not stopped, NOW, we can have it all over again in less than 5 years. The Central Bank is not at fault, aside from giving the false premise that it could control prices, with the conflicting mandate it had in regards to rates and price stabilization. I just put up an article on Mr. Sentance’s report on my blog!Best,Yourihttp://globalviewtoday.blogspot.com/

Youri,It’s not the greed of the market that causes asset price bubbles, but inflation of the money supply, which is entirely the fault of central banks and financial regulators (and, as I guess Not An Economist might add, the “fractional-reserve banking system.”)Put simply, increases in the money supply don’t affect consumer-prices first, and cannot simply raise them evenly. Instead, the new money has to be invested somewhere: either in shares or in houses.Since 2003 the B of E has been increasing the money supply by 10%-15% a year (B of E’s own figures). The result has been house price inflation of… surprise, surprise… 10%-15% a year.Free market money would not do this.

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