Douglas Carswell's Blog

It is central bankers who should be in the dock

Ed Miliband is calling for a Leveson-type inquiry into banking.  Should Conservative MPs join forces with him, and vote for it?

If by "Leveson-type inquiry" one means an inquest that takes as its starting point that a lack of regulation was the problem - and that more regulation must necessarily be the answer - I'd say its the last thing we need.

We ought instead to have an inquiry into the wider banking and credit system that landed us in this mess.  However serious the failings of investment banks, the real culprits are the central bankers. 

Barclays and others might have behaved outrageously in manipulating the libor rate on occasions.  But the Bank of England has been systematically manipulating lending rates for years. 

If the actions of investment banks cost punters many millions, the behaviour of the Bank of England has cost savers billions - and ultimately wiped several percentage points off our GDP.

The danger is that any inquiry into banking will be presided over by an Establishment worthy.  Yet another grandees who fails to see that it was cheap credit and the actions of central bankers that ultimately got us into this mess.

Hauling the senior management of Barclays up before the cameras might make an entertaining media circus.  A serious inquiry ought to instead begin by interviewing the Governor of the Bank of England, current and previous Chancellors and the top Treasury bods;

Why did they believe that cheap credit would make us rich?  Did they not realise that government guarantees of cheap credit was bound to bloat the banks? Did they not see that easy money would cause a boom, that could only end in a bust?  Have they not heard of the credit cycle?

Official thinking in Whitehall and Westminster still believes that it was "market failure" landed the banking system in this mess.  They fail to see that the markets called time on the central bank's candy floss credit approach.

Too many Conservatives ministers still don't get this.  And so amidst a policy vaccum, Ed Miliband's demand for an inquiry starts to sound credible .....

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