"I think most people expect that we have several more months to get through before the banks have revealed all the losses that have occurred, and we have taken measures to finance their obligations that result from that, but we are going in the right direction." Yes, indeed, but no thanks to the behaviour of the Labour regime.
As lender of last resort any central bank provides liquidity at a penal interest rate to commercial banks against good quality collateral; doubtless the Bank of England, under its estimable Governor, is doing just that right now.
The Bank of England does not lend on commercial terms for commercial purposes, in the kind of operation typical of a soviet-type banking system, where the regime requires the Central Bank, the mono bank, (as was the case with Northern Quicksands as no other bank would go anywhere near it), to lend to undercapitalised enterprises; and even then, loans to those enterprises would be to state enterprises, not to a quasi-fiscal Treasury asset of dubious value.
That Mervyn King had to explain,
"I said to the Chancellor, ''This is not something which a central bank can do ... They don't normally finance takeovers by one company for another, let alone to the tune of £30 billion, which is rather a large amount of money.",
means either the First Lord of the Treasury and the Chancellor of the Exchequer need to repeat Economics 101, or they have mistaken their country and their century.
Furthermore:
The Governor praised the Chancellor, saying,
"And I don't think it took the Chancellor very long to recognise that not only was this something which central banks don't do, it's also something that governments don't do."
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6 comments:
Fiat currency is incompatible with the Human Rights Act 1998 - do you think that this particular credit crunch will be bad enough to give the HR Act a chance of displacing fiat currency?
10.34. doesn't matter how bad it is, no. not gold, not cowrie shells, not dollars, not green axe blades
Would anonymous (07 November 10:34) care to explain why she thinks Fiat Currency is incompatible with the 1998 Human Rights Act? Or does she think Fiat is a car producer?
Fiats rather than gold or cowrie shells, (though not the green axe blades), are more attractive though unwieldy - not divisible enough C., perhaps using different models might serve. 10 500s equal a Dino coupe; vintages could come in handy too.
Imaginative but unworkable. Bad enough having both gold and silver as bimetallic money, here you would have lots more objects as money. The relative price of a Dino coupé 1975 vintage and a 2007 Fiat new 500 would vary daily, a fixed price would unleash Gresham's Law and bad cars would chase good cars out of circulation.
Whereas a flexible relative price of cars would be very uncertain and hard to keep track of.
Unless you bundled together lots of different cars in given fixed proportions and securitised the lot issueing fully-car-backed-paper-money, which would be both Fiat (because of Fiat cars in the bundle) and non-Fiat (because of full backing by cars).
I look forward to Anonymous authentic interpretation of her obscure thoughts...
I'm going to alter the title of this post to 'not economics 101'. Economics never is.
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