Bank of England Urge Central Banks to Create Their Own Digital Currencies

EPJ

 

In a research paper published on Monday, John Barrdear and Michael Kumhof, economists at the Bank of England, call for central banks to issue their own digital currencies, along the line of Bitcoin.

They based their advocacy on the idea that “reductions in real interest rates, distortionary taxes, and monetary transaction costs” would boost the economy of the US, for example, by, get this, a permanent 3%.

Part of their argument is based on the view that central bankers using digital currency would have a more effective tool to tame financial booms and busts.

This flies in the view of Austrian school business cycle theory, which views the actual creation by a central bank of money (and thereby credit) as the epicenter of the problem.

A digital currency that could be expanded and contracted by a central bank does nothing to eliminate the misallocations and potential threat of raging price inflation that occur from Federal Reserve money supply manipulations.

What a digital currency would do is make it easier for government to track everyone's transactions. Thus. expanding the surveillance state.

The Big Guns Are Out: Soros, Rothschild Warn Of Brexit Doom; Osborne Threatens With “Suspending” Market

Zero Hedge

The big guns are officially out. Just yesterday, we recounted the story of “Black Wednesday” when on September 16, 1992, the UK was forced out of the EU’s exchange-rate mechanism, or ERM, when the BOE tapped out and allowed the British pound to float freely, leading to 15% losses in the sterling. As we noted, this was George Soros’ infamous trade which “broke the Bank of England” and made the Hungarian richer by over $1.5 bilion. 24 years later Soros is back, and this time he is warning against the kind of devaluation that made him a billionaire and which he believes will be unleashed by Brexit, when in a Guardian Op-Ed he wrote that U.K. voters are “grossly underestimating” the true costs of a vote to leave the EU, saying that there would be an “immediate and dramatic impact on financial markets, investment, prices and jobs.”

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Government Officials Admit to ECONOMIC False Flag Operations

Washington's Blog

False flag attacks don’t just involve physical deaths and wars …

They also involve faked economic events and financial casualties.

For example, two officials of the International Monetary Fund said last month that they needed the threat of an imminent financial catastrophe to force other players into accepting its measures such as cutting Greek pensions and working conditions, and – as the Greek government put it (via Bloomberg) – the IMF was “considering a plan to cause a credit event in Greece and destabilize Europe.”

High-level officials also admitted to intentionally destroying their own nations’ economies in order to “justify” structural economic reforms.

For example, Japanese Prime Minister Junichiro Koizumi and Japanese central bank officials admitted that they kept Japan’s economy in a deflationary crisis to promote “structural reform” which would allow the Japanese economy to be looted by foreign interests. Japanese central bank officials admitted the same thing.

Japan Times noted in 2003:

Official statements by BOJ executives [reveal]: The BOJ can be helpful by not being helpful. The princes recognized that such structural change was so opposed to the special and general interests of most Japanese — citizens, businessmen, bureaucrats and politicians — that it could be achieved only by crippling the economy and preventing its recovery.

Something similar happened in Thailand and the EU.

Indeed, the former head of the Bank of England said  last month that the depression in the EU was more or less a “deliberate” policy choice.

And an economist at insurance giant AIG – and former head of the European Commission’s unit responsible for the European Monetary System and monetary policies – said in 2008 that what European leaders wanted was to create a crisis to force introduction of “European economic government.”

Indeed, Greece (more), Italy, Ireland (and here) and other European countries have all lost their national sovereignty to the ECB and the other members of the Troika.

ECB head Mario Draghi said in 2012:

The EU should have the power to police and interfere in member states’ national budgets.

***

“I am certain, if we want to restore confidence in the eurozone, countries will have to transfer part of their sovereignty to the European level.”

***

“Several governments have not yet understood that they lost their national sovereignty long ago. Because they ran up huge debts in the past, they are now dependent on the goodwill of the financial markets.”

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UK banks won’t survive another recession

RT

Former Bank of England governor Mervyn King has warned that British banks are too weak to weather another financial crisis, adding that government officials haven’t “got to the heart” of what went wrong in 2008.

Speaking to BBC Radio 4 on Monday, King criticised current measures being taken by the BoE to stabilise the economy, including keeping interest rates at a record low – currently at 0.5 percent – for more than five years.

“I don’t think we’re yet at the point where we can be confident that the banking system would be entirely safe,” he told the programme.

“The idea that we can go on indefinitely with very low interest rates doesn’t make much sense,” he added.

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The Bank of England is preparing the next crash

Richard Murphy
Tax Research UK

The FT worries me this morning. First it said this:

The UK can have a growing banking sector without condemning itself to more frequent and costly financial crises, the Bank of England has said.

The sector is on course to double from its current size to more than 950 per cent of UK gross domestic product by 2050, far outstripping projected increases in other Group of 20 nations, the BoE said in a report published on Monday.

Then there was this:

The Bank of England says the vast majority of mortgage borrowers could handle interest rate rises of up to 2 percentage points, marking a significant shift in its stance on how higher borrowing costs will hit household finances.

The shift signals that the BoE is getting closer to changing policy and wants to reassure the public and financial markets that Britain’s borrowers can cope.

Both of which have to be read in the context of the FT noting last week that:

The new [Office for Budget Responsibility] forecasts show UK household debt rising even faster than previously thought in the next parliament (2015-20) to a record high of more than 180 per cent of gross domestic product.

And this has to also be noted in the light of the Resolution Foundation’s quite reasonable warning that maybe one million UK households would be plunged into debt crisis by the mortgage rate rises the Bank of England is now envisioning.

So, what is happening here? I suggest there are three things.

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The UK GOLD

  "With a permanent office in Parliament, a budget of $1.2 billion and the media-avoiding tactics of the super-rich, the City relies on lobbying and silence to carry out it's offshore tax avoidance, robbing the state of tens of billions in revenue every year."

www.theukgold.co.uk/

“The City of London’s murky tax
avoidance all wrapped up with
Queen and Empire”

Thom Yorke

“A story seismic enough to shift perceptions
of finance and flag forever”

WRITTEN & DIRECTED BY MARK DONNE
Produced BY Mark Donne AND Joe Morris

for any further information please contact

info@brass-moustache.co.uk

There is talk of revolution in the air

Comment: No amount of QE is going to fix what is a corrupt, cartel-based capitalism no matter how you try and interpret it. And to imagine that Britain and its government has handled severe austerity measures and the economy with "grace" while imagining that we can "leave it to parliaments" to spend the money is missing the point entirely. Revolution is deeper than that and is very painful when a new system based is required. 

"British institutions have worked." Oh please. It's because they haven't worked that we are where we are today. The Bank of England and the Corporation of London are a law unto themselves.

Evans Pritchard is just calling for little picture vision and a return to business that is open to the same bubbles and manipulations of yesteryear. Still, you can't expect a conservative man by nature to go too far out of the box - he's already done quite well by agreeing with Brand.
_________


The Telegraph
Ambrose Evans-Pritchard

Russell Brand is more right than wrong. Pre-revolutionary grievances are simmering in half the world, openly in France and Italy, less openly in Russia and China. 

The Gini Coefficient measuring income inequality has been rising for 25 years almost everywhere, thanks to the deformed structure of globalisation. 

Companies can hold down wages in the West by threatening to decamp to the East. “Labour arbitrage” boosts the profit share of GDP and eats into the share of workers. 

That is how Volkswagen extracted pay cuts at German plants in 2005. The German reforms now being exported to Club Med are why Germany’s Gini index has soared and why German life expectancy is falling for the poor. 

It is also why the Social Democrats are taking such a hard line in coalition talks with Chancellor Angela Merkel. Even Switzerland is stirring. Voters will decide this Sunday whether to cap top pay at 12 times the lowest rung. 

The US Congressional Research Service says the income share of the richest 1pc of Americans reached a record 19.6pc last year. 

It never rose above 10pc for the whole post-War era until the mid-1980s. The 1pc Club has bagged 95pc of all gains since the Lehman crisis. 

Such extremes must ultimately threaten political consent for market capitalism. Yet quantitative easing as conducted in the rich countries risks making matters worse. The money is leaking into asset booms, without much economic trickle down. 

The Bank for International Settlements says the credit markets are becoming unstable again. A hunt for yield is creating a stampede into high-risk assets, “a phenomenon reminiscent of exuberance prior to the global financial crisis”. 

The 10-year Shiller price-to-earnings ratio for Wall Street’s S&P 500 is 50.3pc above its historic average, and higher than before the 1987 crash. Yes, it can go even higher. But should the US Federal Reserve try to push it there by purchasing the $85bn of bonds each month? 

Even as stocks soar, world trade is becalmed, and the West is still stuck in a contained depression. 

Manufacturing output is still down 3pc from its pre-Lehman peak in the US, 6pc in Germany and the UK, 7pc in Japan and France, and 12pc in Italy. Compare that to the 60pc surge in US factory output over the same time lapse in the 1990s. It is another world. 

The US workforce shrank by 755,000 in October. The labour participation rate for men dropped to 69.2pc, the lowest since data began in 1948. Discouraged workers are dropping off the rolls. 

Former US Treasury Secretary Larry Summers says the US is trapped in “secular stagnation”, a bad equilibrium where the interest rate needed to keep growth alive may be as low as minus 3pc. 

It takes fresh bubbles to keep the show on the road, and it threatens to become “chronic and systemic”. This is our brave new world. If Mr Summers is right, we need to go to the next stage of QE. Rather than relying on more bond purchases, the stimulus could be injected into the veins of the economy, or into the “income stream” in the words of the late Milton Friedman. 

“We can spend it on roads, railways, smart electricity grids, or anything we want,” said Lord Turner, ex-chief of the Financial Services Authority. “Or we can cut taxes, targeting employers’ national insurance so that it creates jobs here and does not leak out.” 

Professor Richard Werner, from Southampton University, suggests “Green QE”, a £50bn blitz of spending on wind turbines and solar panels with funds created out of thin air by the Bank of England. 

Exactly the same could be done by the Fed and the Bank of Japan. “There is a whole spectrum of things you can do,” he said. 

Or we might want to erect 300,000 homes on brownfield sites (not in my village, of course). This would help drive down ratio of house prices to incomes, rather than trying to drive it up. The point is that QE is versatile once you break free of central banks shibboleths. 

The constraint is that money should be used for “one-off” projects, aimed at raising the long-term dynamism of the economy. “Central banks are terrified of going into this space. They are afraid that it will be used to excess,” said Lord Turner. 

The authorities can mop up excess liquidity to avoid inflation when the time comes by restoring reserve requirements on lenders, in abeyance since the 1980s. You could go further. You could reverse QE bond purchases — deliberately forcing down asset prices — while offsetting this with a switch to fiscal spending covered by printed money. 

You might even raise interest rates, exactly the opposite of what the Fed is trying to do. 

As for the debt created by this quasi-fiscal putsch, it is an accounting fiction. The government can issue zero-interest consols. Past deficits can be monetised by shuffling the QE furniture. Britain can slash its debt from 95pc of GDP to nearer 70pc by legerdemain. If France, Italy, and Germany want to do it the hard way, they guarantee a lost decade. 

There is such a thing as a free lunch. It is called QE in a deflationary world. Lord Turner says it may even be necessary to wipe out this debt openly — rather than in the underhand way happening now — in order to convince people that stimulus is for ever. 

To those who say this violates the Weimar taboo, the answer is that near anarchy in Germany under reparations in 1923 tells us nothing about our current predicament. 

We live in a deflationary age more akin to the 1930s. The apostles of orthodox economics at that time — Irving Fisher, and Chicago’s Henry Simons — floated just such plans for “overt monetary financing” in slumps. 

Japan’s Takahashi Korekiyo carried out a live experiment from 1931-1936. The fiscal and monetary double shock achieved “escape velocity” within two years. Japan was the first major country to recover from the Depression. 

If you are worried about central bank independence, the bank could have the same powers to calibrate fiscal stimulus as it enjoys over monetary stimulus. It could leave it to parliaments decide how to spend the money. None of this is beyond the wit of man. 

To Russell Brand I would say, you are too harsh on British leaders. Tories and Liberal Democrats have responded to the national crisis with grace and impressive discipline, as Labour would undoubtedly have done too. British institutions have worked. And please, stop talking down the vote. Democracy is our sword

World facing worst financial crisis in history, Bank of England Governor says

You don't say?

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Telegraph

Sir Mervyn King was speaking after the decision by the Bank’s Monetary Policy Committee to put £75billion of newly created money into the economy in a desperate effort to stave off a new credit crisis and a UK recession. 

Economists said the Bank’s decision to resume its quantitative easing [QE], or asset purchase programme, showed it was increasingly fearful for the economy, and predicted more such moves ahead. 

Sir Mervyn said the Bank had been driven by growing signs of a global economic disaster.

“This is the most serious financial crisis we’ve seen, at least since the 1930s, if not ever. We’re having to deal with very unusual circumstances, but to act calmly to this and to do the right thing.”

Announcing its decision, the Bank said that the eurozone debt crisis was creating “severe strains in bank funding markets and financial markets”.

The Monetary Policy Committee [MPC] also said that the inflation-driven “squeeze on households’ real incomes” and the Government’s programme of spending cuts will “continue to weigh on domestic spending” for some time to come.

The “deterioration in the outlook” meant more QE was justified, the Bank said.
Financial experts said the committee’s actions would be a “Titanic” disaster for pensioners, savers and workers approaching retirement. Sir Mervyn suggested that was a price worth paying to save the economy from recession.

Under QE, the Bank electronically creates new money which it then uses to buy assets such as government bonds, or gilts, from banks. In theory, the banks then use the cash they gain to increase their lending to businesses and individuals.

By increasing the demand for gilts, QE pushes down the interest rate yields paid to holders of these and other bonds. Critics of the policy say it pushes up inflation and drives down sterling.
The National Association of Pension Funds yesterday called for urgent talks with ministers to address the negative impact of lower gilt yields on pension funds. Joanne Segars, its chief executive, said QE makes it more expensive for employers to provide pensions and will weaken the funding of schemes as their deficits increase. “All this will put additional pressure on employers at a time when they are facing a bleak economic situation,” she said.

Ros Altman, of Saga, said the latest round of QE was “a Titanic disaster” that would increase pensioner poverty. As well as fuelling inflation, she said, falling bond yields would make annuities more expensive, “giving new retirees much less pension income for their money and leaving them permanently poorer in retirement”.

The MPC also voted to keep the Bank Rate at its historic low of 0.5 per cent, another decision that hurts savers. Yesterday, protesters outside the Bank’s headquarters smashed a giant piggy bank to symbolise the situation of pensioners and others forced to raid savings to keep up with the rising cost of living.

Asked about the plight of savers, Sir Mervyn said it was more important to support the wider economy than to support them. He suggested that savers would not be helped by deliberately pushing the British economy into recession. Yesterday’s decision was the first move on QE since 2009, during the global credit crisis, when the Bank injected £200 billion into the economy.

Some analysts believe that this round of QE could be less effective than the previous one, forcing the Bank to create even more money this time.

Michael Saunders of Citigroup, forecast that there could be as much as £225 billion more QE by next year. “I think they will do lots more QE,” he said. “It’s both that the economy is weak but also that the MPC’s view is that QE is not a very powerful tool, or rather it takes a large amount of QE to have much effect on the economy.”

The Bank is supposed to keep inflation near a target of 2 per cent. Inflation now stands at 4.5 per cent, and the Bank admitted it is likely to hit 5 per cent as soon as this month. The Bank’s own research shows that as well as stimulating the economy, QE pushes up prices.
Sir Mervyn insisted that yesterday’s move was still consistent with the 2 per cent inflation target, saying that the slowing economy means inflation could actually fall below that mark “by the end of next year or in 2013”.

The Governor insisted that the MPC’s decisions had been the correct response to events. “The world economy has slowed, America has slowed, China has slowed, and of course particularly the European economy has slowed,” he said. “The world has changed and so has the right policy response.”

City traders took heart from the Bank’s move to boost growth, with the FTSE 100 rising 3.7 per cent to 5,29, its biggest two-day gain since 2008.

The Bank’s decision came after mounting political pressure from ministers worried that Sir Mervyn was not reacting urgently enough to the darkening global economic outlook.

George Osborne, the Chancellor, welcomed the Bank’s move, saying: “The evidence shows that it [QE] will help keep interest rates down and boost demand and that will be a help for British families.”