Editor’s Note: In light of Steve being re-elected to the Treasury Select Committee here is a short compilation of some of last year’s highlights. Thank you to Youtube Channel TheSyndicate07 for uploading the following videos of Steve on the Treasury Select Committee last year.
1) The homogeneity of capital and the necessary re-balancing of the economy, which will not take place as long as interest rates are distorted.
2) The BIS report last year, which pointed out the distortions caused by loose monetary policy. Governor Carney says the report was made “in a vacuum” which is “not accountable to Parliament”.
3) The financial crisis has had a permanent effect on the economy. Productivity is analysed, including the capital structure.
FWIW, there is and can not be any such thing as ‘mis-selling’ (which Carney mentions in the second video in relation to interest rate swap sales.). The reason is that selling and buying are entirely voluntary acts. There is no coercion. Of course if a seller deliberately misrepresents a product or service then that is a crime; a confidence trick.
The reason that ‘mis-selling’ has come into use is to deliberately demonise market transactions and to evade the Law and the proofs necessary to prove fraud, i.e. confidence trickery. It is just one of the pieces of newspeak peddled by those antipathetic to the market economy or those functionaries who would gain by being able to deploy it to build their constituencies by concentrating benefits and distributing costs.
I also notice how Carney segued a deft evasion of SB’s point about interest rate swaps.
Whilst I think of it, something else Carney and his crew also got wrong was long term fixed rate mortgages, and why we don’t take them up as a nation.
We don’t take them up as a nation Mr C because no-one has any confidence in the Bank of England’s ability to set the ‘right’ rate.
When rates are ‘low’, lenders won’t offer long term fixed rates, at least not without huge fees. When rates are ‘high’ borrowers, quite rightly won’t fix for the long term. These judgements on ‘low’ and ‘high’ are market judgements on the price of money. And given the Banks woeful history on setting the ‘right’ rate, I am backing the wisdom of the market.
It may also be interesting for Carney to learn that research shows that there is no extra reward for the investor for the additional risk incurred for investing in fixed rate securities with a duration in excess of two years. The corollary of that is that the risk of fixing a mortgage rate for in excess of two years leads you to be a hostage the incompetence of the Bank of England. My view is that the least risky /lowest cost (as in total amount payable) mortgage is a full term tracker with the lowest possible spread to the Bank’s base rate.
The thing is, when you meet the great and the good, they usually aren’t. Which is how I would categorise Carney. He suffers from the usual fatal conceit of all (clever) central planners.
P.S. I run a (successful) retail financial advice business…
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