Bank of England boss takes on his critics and a deep-fake video
Kevin Warsh, who has just had his first interest rate meeting at the Federal Reserve, saw his predecessor Jay Powell suffer abuse from Donald Trump for refusing to do the President’s bidding.
Andrew Bailey at the Bank of England is trying to find the creator of a recent social media video of him brawling on Question Time with Nigel Farage.
The post is a deep-fake, but the pair are at loggerheads. One of the main flashpoints is the seemingly obscure issue of Quantitative Tightening (QT).
It is unlikely to stay obscure for long, however, because of the enormous losses it is inflicting on the taxpayer.
Bailey penned an article in the national media a few days ago defending the Bank’s approach on QT.
It looked like a pre-emptive strike against his detractors, who include politicians and economists from the Left and the Right.
Andrew Bailey at the Bank of England is trying to find the creator of a recent deep-fake social media video of him brawling on Question Time with Nigel Farage
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Dear reader, if you have been more enthralled by the World Cup and the by-election than QT, please come with me on a brief trip back to the Great Financial Crisis.
The row is about losses incurred in the reversal of the vast money-printing known as Quantitative Easing (QE) that central banks undertook to save us from utter ruin.
To do this, the Bank created reserves to buy up gilts, or UK government IOUs. These reserves are held on deposit at Threadneedle Street by the commercial banks and the Bank pays interest on them.
The whole process is indemnified by the Treasury, which each quarter takes any profits or covers any losses.
Read More
Britain too weak to start putting up interest rates now, warns Bailey as Bank of England votes to hold
Until 2022, it was profitable for the UK taxpayer, because the Bank earned a higher rate of interest on the QE gilts it had bought than it was paying to the commercial banks.
The gains flowed in, peaking at just under £124billion in September 2022. Now the tide is going out: when interest rates rose, those profits turned into losses and the Bank is also selling gilts for less than it paid for them.
The Treasury has handed over £108billion since 2022 and the Bank’s estimates suggest an overall negative net cashflow of £125billion over the lifetime of QE/QT.
This doesn’t take into account the havoc that would have been visited on the world without QE.
Nevertheless, this is real money that could have been spent on other things, such as defence, or helping NEETs into work.
What can be done about it now?
The Bank has been urged to stop selling gilts into the market at less than it paid and instead keep them to maturity as other central banks do.
Bailey argues this would merely prolong, not alleviate, the agony. Curtailing interest payments on reserves to the commercial banks, another suggestion, could hurt consumers, the Bank believes, because lenders would seek to recoup at customers’ expense.
Bailey’s detractors believe he is doing a poor job. Be that as it may, the core of the row – as with Trump’s fury with Powell – is not personal but the tenet of central bank independence.
The whole point of it is to take decisions on interest rates out of the hands of politicians, who may be motivated by short-term electoral interests rather than the good of the economy.
Getting rid of governors through formal methods has deliberately been made very difficult in order to preserve that independence.
But on QT, the sums are too large and the questions too serious to be left to Threadneedle Street alone. There needs to be an informed debate, before it gets uglier than any deep-fake.
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Compare the best investing account for youBadenoch blasts 'moaning' female Labour MPs over Burnham jobs 'quota'
Kemi Badenoch has told Labour women to earn a job in Andy Burnham's Cabinet instead of demanding they are handed jobs because of their gender.
The Tory leader lashed out today amid reports that female MPs are demanding the de-facto new prime minister introduce a 50:50 gender split 'quota' in his government.
Amid reports that former foreign secretary David Miliband is being lined up to return to the role, possibly with his brother Ed as Chancellor, one female minister also complained that Burnham could not have 'more Milibands than women' in the top posts.
But in a scathing article in the Times today Mrs Badenoch told them to 'stop moaning' and get chosen on merit instead of retreating into 'more of the failed identity politics that is holding back our country'.
'There are many, many reasons why you shouldn't have any Milibands in the cabinet,' she said.
'But complaining that the boys haven't given them the right jobs or that the boys are taking all the jobs, just shows that Labour's women still don't get it.'
The idea of quotas was also attacked by Baroness Jacqui Smith, Labour's Skills Minister.
Asked by Times Radio if Mr Burnham should reserve jobs for women, she said: 'No, I think what Andy Burnham should be doing is building the very best team around him to change this country.'
A letter written by the Women's Parliamentary Labour Party has called on Mr Burnham to ensure a 50:50 split between men and women in government jobs
Amid reports that former foreign secretary David Miliband (above, right, in 2010) is being lined up to return to the role, possibly with his brother Ed as Chancellor, one female minister complained that Burnham could not have 'more Milibands than women' in the top posts
But Mrs Badenoch told them to pipe down and get chosen on merit instead of retreating into 'more of the failed identity politics that is holding back our country'
A letter written by the Women's Parliamentary Labour Party and seen by the BBC has called on Mr Burnham to ensure a 50:50 split between men and women in government jobs after he succeeds Sir Keir Starmer.
'We are asking you to demonstrate this change from day one and address the toxicity and misogyny within our own party and government,' it said.
Labour has never had a female leader, while the Conservatives have had three, and Mrs Badenoch urged the government to follow its meritocratic example.
'If you run a meritocracy, then you do not have to worry about jobs for the boys,' she wrote.
'Every woman who is a Conservative MP, every woman who has ever won the leadership, has had to fight to get where she is.
'By contrast, Labour women are demanding guarantees from Burnham. But the truth is he doesn't have to give any guarantees.
'If none of Labour's women are prepared to get their hands dirty and challenge him for the leadership, their demands are toothless.'
'In fact, it's quite revealing that the women's parliamentary Labour Party has written to Burnham asking him to commit himself to at least 50 per cent female ministers.
'This has nothing to do with meritocracy. It is yet more of the failed identity politics that is holding back our country.'
