Federal Reserve & Bank of England

Reply

garagemc Posted: Fri, Aug 15 2008 7:59 PM

rated by 0 users

There is a large case against the Fed, it's excess credit creation has led to bubbles, they burst, which lead us to painful times.

My question is this the same case for Britain and the Bank of England? Our property bubble has been massive and has started to pop, I'm not actually sure if it's been caused by excess credit. I'm just starting to get into Austrian Economics so don't really know where to look for research. We haven't ever really had ultra low interest rates, the lowest was 3.5% at the end of '03 I think.

it has been suggested that for every 1% increase in M4 (our version of m3), it leads to .09% increase in inflation. On a annual basis our M4 is growing at 11.4% (June figure) and inflation is at 4.4% (July Figure), which is way above the 2% target rate.  What I am also trying to figure out is if our current inflation woes are being caused by excess M4 creation or other external factors. M4 Growth was massive at the start of '07 at around 15% and inflation reached 3.1% in March. However, M4 growth is not as large but inflation is much greater.

To sum up does the Bank of England cause bubbles, inflation just like it's counterpart and should we abolish it?

Looking forward to hearing your replies.

Reply

Remnant replied on Mon, Aug 18 2008 8:42 AM

rated by 0 users

The answer is Yes and Yes. 

The Bank of England causes inflation just like the Fed.  With the Northern Rock collapse, the Bank of England "injected" an additional £50bn into the financial system to ensure "liquidity".  Where did the Bank of England get this £50bn from?  And if the Bank of England injects £50bn into a Fractional Reserve Banking system, the real amount injected is a significant multiple of this which must result in an increase in inflation.

A few weeks ago, the Governor of the Bank of England rejected a 30% pay increase in order to not be seen to be greedy in these inflationary times.  But he, in league with the government and the banks, created the inflation. 

The Bank of England's original and on-going raison d'etre is to provide funding for rulers: kings or democratic governments.  It has accomplished this by the confiscaton of bullion, the clipping of coins and the Fractional Reserve Banking System.  It should be abolished.