Maybe someone can solve this for me. Which one of these is more likely to thrust the UK into further economic turmoil in the next two years: another massive bubble and crash in the City or the Monetary Policy Committee making some duff decisions on interest rates?
The smart money has to be on the latter: financial bubbles take many years to develop and the big crashes are rare events. By contrast, the Monetary Policy Committee sets the Bank of England interest rate every month, made a complete hash of this last year and will soon be confronted by some very fine judgements about when to start raising rates as we come out of recession.
And yet (and this is the puzzling bit) everybody is rowing about how we regulate to avoid further bubbles but no-one seems bothered about whether we have the right structures, the right personnel and the right remit to ensure that the MPC doesn’t make the wrong call once again.
I’m not saying that financial regulation is not extremely important but the situation at the Bank is particularly worrying. The only member of the MPC who did get it right – David Blanchflower (who I’m glad to say finally got a gong following my call many months ago – only joking) has left the MPC, while the Bank’s Governor (who got it very wrong) continues to show his hawkish tendencies by attacking the Government’s plans on public spending.
Ah well, it’s a funny old world as Mrs. Thatcher declared just before she burst into tears.