BOE is the English Central Bank.
And since the BOE has no choice but to join all its peers in a global race to the bottom (largely futile in a world in which currencies exist in a closed loop, and in which if everyone devalues, nobody devalues as even Bill Gross figured out yesterday, it is prudent to listen to Haldane’s warnings while he is still in the employ of Her Majesty the Queen. Such as his latest one, in which he says that the scale of the loss of income and output as a result of the crisis started by the banks was as damaging as a “world war.”
From the yesterday’s Telegraph:
The economic impact of the global financial crisis has been as bad as a world war and as a result public anger at banks was reasonable and understandable, said Andrew Haldane, a senior Bank of England official
Mr Haldane, the Bank’s executive director for financial stability, told BBC Radio 4’s The World at One on Monday that the scale of the loss of income and output as a result the crisis started by banks was as damaging as a “world war”.
“There is every reason why the general public ought to be deeply upset by what has happened – and angry,” he said.
The children will pay… And are too ignorant to understand, their future is being sold.
“If we are fortunate, the cost of the crisis will be paid for by our children. More likely it will still be being paid for by our grandchildren.”
Mr Haldane, the Bank’s executive director for financial stability, said banks needed to be more honest about the risky assets on their books if confidence was to be restored to the system and lending to business was to flow again.
“Investors will be much less willing to put their money into the banking system. They will lack confidence in the banking system and will either charge very high rates for lending that money to banks or will just withdraw their money entirely,” he warned.
He urged banks to “spring clean” their balance sheets to get credit into the system and create a “springboard” for a recovery in the economy.
What Haldane is referring to is that the nearly $7 trillion in savings deposits at various US banks (not to mention the countless trillions across the world) are sitting inert instead of generating a given percentage of income on this money. Indicatively, assuming a 5% interest rate, that $7 trillion would generate $350 billion in annual purchasing power each year, or over 2% of GDP. This also excludes the tens of trillions invested in fixed income instruments which in a normal world would also generate fixed income, and instead generate nothing under ZIRP.
Ammo has intrinsic value…