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Brother Can You Spare A Dime ... Or £52 Billion Should Do It

Posted on Sep 22, 2020. by NTI

If you do have a spare £52 billion laying around we in the NTI Newsroom can give you an address at which to leave it. The Bank of England can promise they won't give you negative interest on the loan (if such it is) as our great friend Andrew Bailey confirmed today, dodging as he is speculation that the policy rate might be cut below zero, but you can get 0.01% in a savings account at NatWest for balances over £1,000 (a category you would sneak into).

After last Thursday's rate announcement, which turned out to be the dampest of moist squibs as nothing happened, so there was nothing to 'announce' as such, central bank policy was left unchanged. However, the Bank said that it had begun “structured engagement on the operation considerations” of how negative rates would work. We can save some of those "structured engagements", refer you to the Japanese over a recent period of ten years (poetically called 'the lost decade'), and tell you; badly. Mr Bailey continued, "We have looked hard at the question of what scope there is to cut interest rates further ..." We are going to stop you there, Andrew. The current base rate is 0.1% and that scope left the building some time ago.

For those of you who are not economists, and so are not predicting Armageddon, by cutting rates below zero, banks are discouraged from parking cash at the central bank and encouraged instead to lend it into the real economy instead to boost growth. They can be similarly encouraged by the business end of a shot gun, but that usually ends even more badly.

Back to your spare £52 billion, we should explain our appeal to your better nature. London's leading share index plunged by 3.4 per cent, or 203 points, yesterday as part of a global sell-off that saw European and US stocks succumb to heavy selling pressure. It has to be said that many Wall Street and European stocks confounded belief and rebounded this morning (Tuesday 22 September) after this sharp sell off. It almost makes you wonder if all of these companies aren't suddenly worth a great deal less in a period of 12 hours, but there are people out there manipulating the market to make money. Foolish, we know. But wait, the FTSE was up 0.7 per cent three hours after the opening of business this morning, so they probably don't need all of that £52 billion now. Should we call it a round £40 billion?

In summary, our great country and its main businesses are still about 2.5% less wealthy than they were on Sunday evening and this has nothing to do with speculation about Covid and vaccines and lockdowns and alien invasions, neither is it an over-reaction to news that changes like the outer edges of a cloud in a storm. It is ... okay, it is about speculation and over-reaction, but that is how the market works.

Tell that to little Asad this evening when he asks, "Daddy, what's economics?"

 

 

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