Posted on June 25, 2020  
by Noel Guilford

If you read my blog on Sunday you could be forgiven for wondering if you can believe anything the government and civil servants tell us about the economy.

So when the governor of the Bank of England issued a statement on Monday you probably thought “At last – someone sensible. He’ll tell us what is really going on”.

Unfortunately not. It was frankly – and worryingly – complete bollocks.

Here it is again if you missed it. The Guardian said:

Britain came close to effective insolvency at the onset of the coronavirus crisis as financial markets plunged into turmoil, the governor said. Laying bare the scale of the national emergency at the early stages of the pandemic, he said the government would have struggled to finance the running of the country without support from the central bank.

So again, here are some facts:

  1. The Bank of England is owned by the government.  Its job is to provide the government with money on demand, without limit, so that the government can never go bust, which is what happened in March.
  2. He is not some superhero for graciously agreeing to do this. He’s actually a civil servant who was doing exactly what was required of him. It’s the part of his job that goes with being in charge of the lender of last resort in case he hadn’t noticed.

But even if you can forgive him for wanting to look good, you can’t overlook the fact that he seems to be unaware of the basic rules that govern the Bank of England’s balance sheet stressing the need to reduce the size of the institution’s balance sheet (by which he means its stock of assets, mainly government bonds) before hiking interest rates.

In the current economic situation that would be bonkers. The balance sheet can only be ‘too big’ (too much money in the economy) if we have inflation at too high a level. If we have unemployment it’s too small. That’s it. That’s all he needs to know. But right now we have unemployment, which is likely to increase as the furlough scheme winds down, and he wants to shrink the balance sheet!

I’m beginning to wonder…is it me?

PS Now of course the governor of the Bank of England isn’t stupid (at least I hope not) and so he must have a reason for doing this (other than to f*** up the economy). Answers on a postcard please…..

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Noel Guilford


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