Archive of Past ArticlesThe Bank, the EU, EMU, ECU
and All That Jazz
By Tony French, Forum Manager (1/9/98)
Well, it's official -- we're all doing great! At least, according to
the government we are. In point of fact, that was also the view of the previous government
up to the last election, so it must be true.
Of course, this is all based on the idea
that when inflation is low, everything else falls perfectly into place. Odd then that
house price growth has just halted, the housing market is faltering and retail sales for
the period leading up to Christmas were disappointing to say the least. Strange too that
Tandy are closing sixty shops, John Menzies is selling out and virtually every high street
in the UK has an alarming number of empty business premises. Lest we forget, Britain is a
nation of shopkeepers and has a pub on every street corner, bless her, so what do these
depressed high streets mean?
Clearly, despite the hype, the economy is
not flying quite as high as some would have us believe. Things have certainly improved
since the last recession, but the decision to place responsibility for the base rate with
the Bank of England makes little real sense.
It's very convenient for the government to have another
scapegoat and be able to say, "The Bank sets the rates, that's not down to us
anymore, and the Bank is free from political considerations." What? Pardon me, just
what considerations does the Bank of England have? Someone tell me why a higher
base rate doesn't lead to increased bank turnover? And, banks charge percentages, right?
More turnover equals more profit, yes?
Silly me, I thought the Chancellor had control of this type
of thing, and if dissatisfied with his policies, I could vote for the other lot at the
next election. After all, that is what happened last time. Now that I think the Old Lady
may have become a little self-centred, were do I send my vote to change the Governor? If
we're not content that the current situation is in the best interests of the country,
where do we vote to have, say, the Bank of LEOnet set the rates? I hate to be a cynic, but
I am uneasy with the Bank of Englands lack of accountability. It's the word
gets me every time.
But not to worry, all this will be resolved in the next few
years. The Bank of England will no longer have to carry this burden for the good of the
country. In the not too distant future, this will be the duty in of the Bundersbank. With
the EC comes EMU and it's offspring ECU. How lovely for the Bank of England to be able to
say, "The Bundersbank sets the rates, that's not down to us anymore, and the
Bundersbank is free from political considerations". What? Pardon me, just what
considerations does the Bundersbank have? Someone tell me why a higher base rate
doesn't lead to increased bank turnover? And, banks charge percentages, right? More
turnover equals more profit, yes? My, suddenly I feel chilly.
Tony French previously managed The Microsoft Network's UK
Business & Finance forum, and is the Managing Director of AF Stocktaking.