|  |
Home |  | |
Events | | |
Contact Us | | |
Links | |
|
In this section
- News RSS |
|
Tuesday, 16 February, 2010 
Barclays Bank published profits of £11.6bn and predictably there will be calls from some that they should be a levy or that the profits are too high. Now, let’s get this straight Barclays did not take money from the taxpayer last year; they chose to raise additional funds from the market. They have therefore taken nothing from the taxpayer, and now will contribute through tax on the profits. So why as Taxpayers would we have the right to intervene If they choose to pay bonuses to their staff, are they not entitled to do so? Would people really prefer it if they were just another ‘zombie’ bank contributing only losses? Inflation is up again, although some of the rise could be explained by the increase in VAT last month. As I have said on a number of occasions on this blog, should we be surprised that prices are rising after £200bn of new money has been created within the economy?
Research has been published showing that six out of ten firms were turned down for bank loans last year according to a survey carried out by the Institute of Directors. This research shows just how ineffective the Governments actions were in stemming the credit crunch. The problem was not a lack of money but the fact it was not moving around the system. This is why I think the National Loan Guarantee Scheme we proposed through the recession would have been a better way of dealing with the effects for the credit crunch by helping to ‘lubricate’ cash through the system. Instead we had Quantitative Easing, or increasing the money supply, which as I said above I believe is the root cause of the inflationary upturn we are seeing.
Now we have the challenge of (a) stemming the rise in inflation, which usually requires tighter money supply and higher inflation rates, (b) restoring confidence with the markets, that usually includes paying of Government debt and reducing public expenditure and (c) nurturing a very fragile recession, which usually involves keeping interest rates low.
Interesting times for Economists!
Tags:
| |
Blog RSS feed
