The United States isn’t the only country with a central bank specializing in destroying the economy which needs to be put to an end. As Jamie Whyte over at the Times writes in his latest column, our friends over in the United Kingdom seem to be having a similar problem:
Mervyn King, Governor of the Bank of England, complained recently that he lacked the powers required to fulfil his new statutory role of ensuring stability in the banking system. A more powerful Bank of England would do a better job.
He is wrong. The economy would benefit from a weaker Bank of England, stripped of its principal power: namely, the power to set interest rates.
…When interest rates are set by a central bank, demand for borrowing can increase without interest rates increasing and hence without the price signal that would cause people to save more. When dictated, interest rates stop playing their market role of optimally allocating resources between current consumption and investment that will deliver future consumption.
Sound familiar? Read the rest here.Published in