Northern Rock
The Northern Rock crisis raises serious questions, two of them being how independent is the Bank of England and should taxpayers be forced to bail out banks? Mervyn King made it perfectly clear that he did not want to inject funds into the system to lower LIBOR. The Bank's role is to be a lender of last resort. Period. Darling Darling should have taken greater heed of those words. He knew that the Rock was being battered by massive waves from the credit crunch and he should have spoken to the CEO, formed a sensible plan and averted the panic. To charge in at the eleventh hour and say that he'll guarantee all deposits is a nonsense. Taken to its logical conclusion, he's saying that all faltering banks will be bailed out by UK taxpayers. Anatole Kaletsky reckons that in the worst case the Bank of England would have to lend £30-40bn to Northern Rock, there would be a massive loss of confidence in the whole banking system and that interest rates would have to be slashed and markets flooded with money. Not good news for sterling or inflation but, hey, that's the worst scenario.
posted by Whispering Walls at 8:38 am
5 Comments:
Hm - seem to remember having this converstaion with you before. The BofE has had the legs chopped from under it, and in my view the real danger with that is that all those people who THOUGHT it was independant and moved money here will take it all away again.As you rightly say, Darling Darling has been a complete disaster ( he was always bound to be) but what is even more interesting is the complete lack of economic and financial understanding that our so called prudent ex-chancellor has.
True, KL. GO should be making far more mileage out of it.
WW - have you seen the cartoon in today's Telegraph, with a quote from Macbeth ??
No I haven't - what's the quotation? Out out damned spot?
Thanks, WW. You've made it clearer to me as I don't understand these matters at all.
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