'Cheers' to Charles Barry (U6) for his blog entry (see below). Anyone else want to join us?1,200 job losses announced by M&S. Another 1,200 jobs lost at Nissan, Sunderland, the UK's most productive car plant. My Year 10 group may be quizzing me tomorrow, after today's discussion of the importance of productivity - guess which car manufacturing plant we were looking at?
Britain's oldest name in the clothing industry, Viyella, goes into administration (or at least part of the business does). The Sofa Workshop is on the brink of administration. Who is next? The impact of the recession deepens by the week - by the day would not be an exaggeration.
And UK interest rates come down to their lowest level since the Bank of England was founded in 1694. As Charles has explained there is a limit to how far interest rates can fall. With 0.5 percentage points knocked off the base rate today, the UK is now reaching this limit. What next? Will we see 'quantitative easing' and deliberate 'printing' of money to prevent the UK entering a period of deflation? Maybe. When the very politicians that gave the Bank of England its operational independence just over 10 years ago start talking about having a say in monetary policy you know that you are living in historic times. I first started to study economics at the height of 'monetarism' - a theory (actually more than that, as it provided the bedrock to a whole new political philosophy - Thatcherism) which urged governments to restrict the growth of the money supply. For an independent central bank to be contemplating deliberate expansion of the money supply is an even bigger shock than the return to fashion of Keynesian demand management.
What intrigues me about this is the battle for control over monetary policy which I suspect will grow over the coming months. Alistair Darling is effectively saying that responsibility for monetary policy decisions will now revert back to politicians. As an economist this scares me, but it doesn't surprise me. Monetary policy decisions made for political reasons are apt to destablise rather than stabilise the economy. And there is now talk of a further boost to government spending too. Economists don't always agree about appropriate policy responses, but at least the debate can be rational and objective. I know who I would want with their hands on the tiller.
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