Thursday, 7 June 2012

Osbourne, King, Van Halen and a large Cigar

Having recently purchased Van Halen newish Album, A different Kind of Truth, I was listening to the track Big River, I had this vision of Mervyn King and George Osbourne in a small (ok you know it would be a palatial yacht) rowing boat drifting down a river both puffing on an old cigar, with Dave Lee Roth booming out Big River, oblivious to the fact they were yards from a rather massive waterfall.

Today we saw the Bank of England leave interest rates and Quantitative Easing the same.

It would appear the Bank of England are in denial, they seem not to accept we are in a double dip recession, or what some are calling the great recession.

They cannot accept that Manufacturing orders are reducing and confidence is low. They cannot comprehend that construction is contracting, this largely to government spending cuts.

We are seeing Mervyn King, an overly cautious Governor of the Bank of England, it is clear there are two problems with the economy, one is confidence and two is demand.

Recently the International Monetary Fund's managing director, Christine Lagarde, said the Bank of England should consider lowering interest rates further to help the UK weather the eurozone debt crisis. The IMF also advocated an expansion of its quantitative easing programme.

Likewise George Osbourne, needs to use his instruments, such as reducing VAT, giving National Insurance holidays for employing young workers, reforming tax to encourage financial houses in invest in longer infrastructure projects, and for government to invest in longer term projects that gives the British economy returns in the longer term and creates demand in the short term.

I fear Both King and Osbourne are not hearing this advice, they've got their ipods on, with the economy heading over the waterfall.

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