Douglas Carswell's Blog

The low interest rates disaster

Low interest rates have created an inflationary boom, says the Bank for International Settlements (BIS). Far from solving our economic problems, says BIS, low rates creates "serious financial distortions” and a “misallocation of resources”.

Thank goodness someone else has now come out and said it. 

First low rates gave us the glut of cheap money which fuelled the credit boom - and ended in bust.  Since then, low rates have done too little to encourage savings - and continued to encourage over-consumption.  

Those who set our interest rates at the Bank of England are supposed to do so with the aim of low, stable inflation. That they have failed to achieve this reflects the fact that the Monetary Policy Committee does not seem to see their task as simply managing the money supply, but the wider economy. 

The MPC appear to believe that interest rates are a tool with which they can manipulate consumer demand in order to make the whole economy grow.

It won’t.   

Economies do not grow because people consume more. Folk consume more because an economy grows.

What is disturbing is that it should have taken BIS, a supranational organisationn, to say what very few of the SW1 tribe seem to have the insight to see or verve to advocate.  Interest rates must rise.

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