The Bank of England's famous grant of 'independence' in 1997 by the incoming New Labour regime was as cack-handed as everything else Gordon Brown has ever touched.
Did the form of independence "promote effectively the goals of maximum employment, stable prices and moderate long-term interest rates". No, it did not.
Apart from hiving off to a Financial Services Authority the essential controls over banking behaviour and propriety, leaving the Bank of England with the research department and the skills to know what was going on but without the power to act, and the power to act in the hands of a mindless, uninformed Treasury puppet organisation, the form of independence was virtually useless in most economic climates.
All the Monetary Policy Committee can do is move the interest rate up and down
A fat lot of use that is in current circumstances.
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The Bank of England's Banking Supervision Department almost to a man moved to the FSA when it was established. And in fact they were teh poor relation even when they were in the Bank. The disvision between market management and supervision was always with us - look at BCCI if you don't belive me.
I'm afraid the Bank senior management have always like to sit in their ivory tower and not get involved in the grubby day to day business (if it is done properly) of bank supervision.
In fairness, the remit of promoting effectively "the goals of maximum employment, stable prices and moderate long-term interest rates" belongs to the Fed, which is an old institution shaped on old economic principles, not to the Bank of England, shaped on the mythical, not empirically established separation of price stability from other targets.
Renouncing to Treasury control over BoE targets made sense only within a framework of early membership of the Euro-zone. Abandoning Treasury powers for nothing was just plainly silly.
Management of monetary policy just through interest rates would require such a larger range of interest rate manoeuvre that it just cannot be implemented. Let's just forget the existing and coming mess and hope for the best. Time to believe in miracles, HG.
Precisely, Anon. The 'essential controls over banking behaviour and propriety,' went off to the FSA; the research department was separated from controls, left with the Bank.
As for sitting in ivory towers, certainly the Governor of th Bank of England is the last sane man standing in the fiasco that is Gordon Brown's financial and economic governance.
Fairness, C? Angels are fair, very fair, famous for it, look at all the statues and the paintings.
And 'old economic principles'? Sound economic principles, rather.
Sweden doesn't seem to have taught any kind of interest rate lesson, does it?
And, as for miracles, what precise mechanisms and forms might they take? If you could change something miraculously, what would you change? Please be specific, no answers on the lose Gordon Brown scenario - it's far too late, like saying 'I wouldn't have started from here'.
What can be done now?
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