Douglas Carswell

13 JUL 2016

There's no justification for more candy-floss credit

The markets are up. The pound is rallying. The threat of big companies leaving Brexit Britain is evaporating. George Osborne's dream of economic Armageddon isn't happening. So why is Mark Carney about to cut interest rates?

In response to the referendum, the Governor of the Bank of England is promising more monetary stimulus. But why do we need it? Three weeks on, markets have already returned to normal.

That's not to say there aren't risks to the British economy. There are. They're just the same risks we were facing before the referendum: an unsustainable housing bubble; zombie banks; and far too much debt.

The problem is that interest rates have been too low for too long. Pension funds are being punished to prop up house prices. Capital isn't going where it's needed to increase productivity and sustain growth. To fix our economy, it needs to be weaned off credit.

But instead, the Bank of England is proposing to do the opposite. It looks to be planning more subsidy for banks. More house price inflation. Even lower interest rates, leaving pension funds even deeper in the red.

The real reason for cutting rates now may have more to do with China than Britain.

China recently devalued the renminbi, in an artificial bid to make its exports more competitive. It's fighting a currency war. As the Telegraph's Liam Halligan argues, Mark Carney may be following suit.

Printing money won't make us richer. Our economy will suffer because of it. But it's got nothing to do with Brexit.

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