George Osbourne instructs on short term growth regardless of consequences

Graham_Devon

In his remit letter to the Bank’s Financial Policy Committee, George Osborne acknowledged the tension between its primary financial stability mandate and secondary task of supporting the Government’s economic policy. But, given the current weakness growth, he told the committee to focus on “the near term economic recovery” regardless of the “trade offs”.

His words stoked speculation within the banking industry that the Treasury might rein in the FPC after it ordered banks and building societies to plug a £25bn capital hole by the end of the year – roughly half of which has already been identified. Treasury and Bank sources denied that the Chancellor wanted the FPC to retreat, however.

In his remit letter to the Bank’s Governor Sir Mervyn King, the Chancellor said: “The remit recognises that there may be short term trade offs between the secondary objective of ... sustaining economic growth ... and addressing sources of systemic risk. It is particularly important, at this stage of the cycle, that the committee takes into account, and gives due weight to, the impact of its action on the near term economic recovery.”

We really are no further forward. What on earth is the point in shelling out copious amounts of taxpayer money on the FPC, only to find out you don't like what they say, so instruct them differently?

In a nutshell, George Osbourne is stating we have to go for short term growth, regardless of the medium term consequences.

Isn;t this is the same policy that we have from the year 2000 onwards?

To fix that, we must do even more of the same?

The FPC was setup with it's main objective to avoid a crisis such as we saw in 2007. They are doing this, but it hurts a little bit... so forget it?!

Even Mervyn King has written to the chancellor warning him to "carefully consider his actions".

http://www.telegraph.co.uk/finance/economics/10028088/George-Osborne-tells-FPC-to-focus-on-short-term-growth.html

Thrugelmir

Graham_Devon wrote: »

In a nutshell, George Osbourne is stating we have to go for short term growth, regardless of the medium term consequences.

There's a confused message from the BOE. Last year FLS was introduced to encourage lending. This year banks need to reinforce their capital positions.

Whatever the message it needs to be clear and in a given direction, i.e. controlled contraction.

The issue with debt isn't growth. Its the worry over another financial crisis. If asset prices were to fall suddenly. Then banks would be insolvent again, at least below the required capital levels.

CLAPTON

need to decide
who is the boss
the elected government or unelected quangos ?

thank god the old tri-partite system has gone.

Thrugelmir

CLAPTON wrote: »

need to decide
who is the boss
the elected government or unelected quangos ?

thank god the old tri-partite system has gone.

BOE was making policy. Carney arrives shortly. So setting the new boundaries in place now.

antrobus

Graham_Devon wrote: »

....In a nutshell, George Osbourne is stating we have to go for short term growth, regardless of the medium term consequences. ...

There's a General Election due in 2015.

Mrs_Bones

antrobus wrote: »

There's a General Election due in 2015.

And short term policies will start to reign as king as more panic sets in.

pqrdef

Graham_Devon wrote: »

The FPC was setup with it's main objective to avoid a crisis such as we saw in 2007.

What's the point of avoiding a crisis if we never recover from the last one?

It's when things start booming that the knob-twiddlers are supposed to act to take the heat out. We don't need that now.

So what's he been playing at the last 3 years? Does he still think that monetary policy can produce growth when the customers are all on £50 dole?

Conrad

The capital adequacy rules have long hampered growth. We're reasonably well placed for example with the amount of private debt being repaid, to take a chance on a relaxation of rules.

IronWolf

Looks like they've finally realised that trying to increase regulation on banks and simultaneously get them to increases loans in the economy is impossible.

Thrugelmir

Mrs_Bones wrote: »

And short term policies will start to reign as king as more panic sets in.

May Day. Plenty happening. A reminder as to how fragile the global economy is.

• In central Moscow, at least 70,000 people turned out for a trade union parade backed by the governing United Russia Party, according to police figures
• In Istanbul, police used tear gas and water cannon after protesters defied a ban on May Day demonstrations. Officials say the ban is to protect renovation work taking place at Taksim square, a traditional rallying point
• Protesters demanding the execution of factory bosses over the deaths of hundreds in a recent building collapse in Bangladesh marched in their thousands in the capital, Dhaka
• Rallies have been called in more than 80 cities in Spain
• Thousands of Filipinos marched in Manila demanding the government protect jobs and improve worker contracts
• Cambodian workers rallied in Phnom Penh, calling for higher wages
• Some 55,000 marched in Indonesia's capital, Jakarta, protesting at low wages and outsourcing
• Trade unions held demonstrations in Tokyo, with calls for more youth employment one of the main focuses
• In Hong Kong, trade unions said they were expecting 5,000 people to march in support of striking dock workers

grizzly1911

Thrugelmir wrote: »

May Day. Plenty happening. A reminder as to how fragile the global economy is.

We neutered an dismembered unions, which are is still seen as bad , by many, despite benefiting from many things they fought for. Workers in the emerging markets are realising they need to act in unison to progress their case for improved pay and safer working conditions.

Bizarre.

Hopefully we will meet in the middle sooner rather than later.