Comments: Best chancellor of them all

Another reason for the poor performance is the slow growth of many companies’ profits due to the extra cost of all that extra red tape created since 1997.

Gordon Brown No. 2? No way! I thought he to be the most reckless chancellor in living memory, one only has to look at the massive (out-of-control I’d say) imbalances in the economy today. There’s also the Pensions and Savings crisis…

Everyone seen to think that Brown’s decision to make the BoE independent a brilliant move. I thought so too but from the point of view that the Treasury no longer get the (usually negative) flak that comes with its interest rate decisions. Is the MPC truly ‘independent’ ? I don’t think so as it has targets to meet, the main one being to ensure that the (unrealistic) CPI index is within a certain range – very much a political decision and as such the MPC’s decisions are mainly political rather than sensible economic ones. In other words the MPC does not really have a free rein in its interest rate decision-making process. Also the nine-member MPC is made up of four Brown appointees then there’s the Governor and probably a couple of others usually go pro-Treasury.

I’d say the UK interest rate neutral territory is now 7-7.5%, not 5%-5.5% now that the economy’s firing on all four cylinders. Had interest rates stayed at around the 5% level since 2001 I’m sure the imbalances would not be so massive today. My view is that the MPC decisions have been disastrous for the economy. There was no need to lower the interest rate after Sept 11th. Unlike the US and some Euro economies the UK was not in or going into recession. The massive expansion in the public sector would have ensured that the UK did not do so had the interest rate remained at neutral levels.

Look at New Zealand’s economy, the Central Bank’s is struggling to control its domestic economy which, like the UK is at full strength, even with the interest rate at 6% and is predicted to rise much further.

John Major’s catchphrase ‘if it isn’t hurting, it isn’t working’… very much what the MPC’s doing with its dithering interest rate decisions!

Interesting what you said about Howe that he was savaged by 364 economists who protested about his policies but he changed the direction of the economy and began its renaissance. I feel the opposite is going to happen with Brown and his policies – which are virtually embraced and praised by many economists. The massive imbalances will tip the economy into a long and painful recession.

I also predict massive hikes in the interest rates after the forthcoming US presidential election which will create a currency crisis forcing most OECD central banks to raise rates to protect its currencies. I also predict a snap October/November General Election in the UK.

I enjoy reading your articles – thanks for writing them.

Posted by Charles W. Waddams at August 2, 2004 10:45 PM

Had no idea that my remarks were 'printed' ! Thanks

Posted by Charles Waddamsq at March 2, 2005 10:05 PM

Denis Healey cannot be dismissed as a poor chancellor. The IMF crisis was inevitable, with the prospect of needing a bail-out every year since devaluation in 1949. The exact causes of the need for the loan was not Healey's doing either: his predecessor Barber ruined the economy with electoral bribery and 'too little too late' expenditure cuts and strike action for inflation-busting demands anchored any plans Healey had. In the aftermath of the IMF bailout, growth improved at a marginal rate despite calls from the left for Healey to go, in fact without the IMF loan, the economic miracle of the Thatcher years would have never occurred. Healey and Callaghan's limited success was so great that had it not been for the Winter of Discontent, or had Callaghan called an election in Summer 1978, Labour would have beaten Thatcher.

Posted by Jimmy at November 2, 2012 09:18 AM