George Osbourne was looking quite worried and distracted at last week’s PMqs. The unblinking vacancy plus head lolling as he sat on the front bench beside Cameron can’t be anything to do with Jeremy Corbyn because the media are fully on side in condemning the Labour leader eg for riding a ‘Chairman Mao’ bike (Times). Perhaps Osbourne’s condition had more to do with being stressed over the latest deficit figures – officially the highest for 24 years (see Independent today). The truth is, that ‘boom and bust’ hasn’t gone away, its just that every bust goes more global.
The £375,000,000.000 that the Bank of England has shoved into the economy since the financial crisis via Quantative Easing so far hasn’t really made much difference to The State of Things, there’s still not much money around apparently. Inflation remains low and interest rates – well – personally, I’ve been struggling to understand why some people say they will rise soon while just as many others say they will fall further.
Seems to me this interest rates/inflation issue, while partly a result of global changes, definitely has something to do with the reasoning behind why the banks now want to abolish money all together. From reading shar.es/172VKB via @richardjmurphy who deconstructs the Bank of England chief economist Andy Haldane’s latest comments, the only way that the Bank of England sees it can increase Britain’s inflation rate to the desired level (3% and more recently revised to 4%) is to buy (in other words pay off) the UK Government’s debt. This will presumably allow the Government to spend more to increase money in circulation, which then could lead to an inflation rise. Only trouble is, while keeping up the pretence in doing this that the Bank of England would do this for sound economic reasons as an independent company etc and importantly, to stop it going insolvent – interest rates would need to go negative – the bank would take money from bank accounts. That’s my understanding. Which makes abolishing cash is important: because you wouldn’t want people to be able to stop keeping their money in a bank would you?
A bit of a desperate scheme though, the kind that might keep one a bit distracted and wide eyed with thinking about how one might sell that to the British Public and still be the next Conservative leader.
Assuming the Conservatives make moves to abolish cash and there are negative interest rates, surely – despite all the frames of language reference – this would actually be a form of Government taxation wouldn’t it?
And what about the sustainability of such a system in an increasingly volatile world?