I can't, however, say that I entirely approve of what the Bank of England's is doing. It seems to amount to the following:
1. Let the pound fall because nothing can stand in the way of the wall of sellers. Let it find its own floor.
2. Keep interest rates at rock bottom for even longer and indeed go so far as to start charging institutions to leave money unused in some circumstances
3. Start pumping money back into the system again via what has now become widely known as "Quantitative Easing".
The impact of these measures is moderately helpful. They amount to a serious attempt to make sure the Brexit crisis doesn't set off another dangerous spiral downwards of fragile financial institutions. I have no great love for banks but have always been absolutely convinced that if you let any great number of banks go to the wall then the impact on ordinary people's lives is very quickly very nasty indeed. It is far better that the Bank of England tries to head off problems in the financial sector before they happen than that it doesn't. The Bank's decision to pump money into the system should be enough to stave off some of the unpleasant consequences of exit uncertainty. and impose even austerity. Especially if the Conservatives continue to dither over how to meet sky high Brexit expectations without ditching decades of commitment to an economic ideology that requires austerity for the poor and tax cuts for the rich. But .....
The problem with the way the Bank of England is using Quantitative Easing is that they are helping the wrong people to do the wrong things. The financial institutions that are once again getting a nice injection of liquid cash have had a nasty tendency to use it to buy shares or property not to invest in helping small business to grow and expand. As a result the previous £375 billion was injected into the economy without making any impact on the major structural weaknesses of the UK. It was enough to win the Conservatives an election but not much use in changing the competitiveness of the real economy. We got an inflated London property market, share prices that were higher than normal and banks that slowly returned to some kind of profitability. We didn't get a reformed steel industry fit for the future. We didn't equip the UK to sell modern low energy products around the world. We didn't help our design or creative industries to spearhead new job creation & increase earnings of foreign currency. We didn't get affordable homes built where they we needed for the people that needed them. We didn't get serious investment in transport infra-structure in the regions, just a lot of words about a northern powerhouse. So the balance of payments crisis continued to worsen.
The latest injection of quantitative easing cash is repeating those past mistakes and is even less likely to be effective. So far it has proved enough to encourage a rally in FTSE 100 share prices despite increased business risk. It has not, however, been enough to fend off a dangerous crisis in commercial property companies. The falling pound and the uncertainty over the UK's future is resulting in a rapid appetite to offload ownership of London property. No bad thing you might think if that makes it London a cheaper place to do business and especially if it spilled over and made London a cheaper place to live. However, as we all should have learned in 2008, when an asset price bubble gets pricked the way down can be even worse than the way up.
It is not clear what the impact on the UK economy will be of property company after property company refusing to allow investors to sell what they own. Is there any prospect of these companies ever paying back their investors? What will be the impact on the wider economy if those investors are poorer? What other financial institutions become at risk if the assets they own in property companies are no longer available to them to use or become worth a lot less? How many foreign investors are going to want to pull even more of their assets out of the UK if the pound continues to fall and what looked like safe investments begin to lose a great deal of money?
In this environment of short term volatility and increased risk post Brexit what we badly need is some long term thinking and some stable long term investments in re-positioning the UK's economy. That is not going to happen as a result of pumping money into the system to help avoid the worst excesses of panic from investment bankers, foreign investors and property portfolio companies. Money has to be directly invested by the government in a planned programme. So a significant proportion of the cash that the Bank of England is creating needs to be provide to the government for an investment in change fund to prepare the country for a probably exit from the EU.
It is no good hoping that the UK is suddenly going to trade more with the rest of the world simply because we are supposed to be on the verge of "regaining our sovereignty". That means absolutely nothing to hard headed purchase managers or to ordinary people trying to decide what to spend their money on. We have to start work on developing products, services and businesses that are able to offer things that the rest of the world wants. Free trade doesn't automatically increase a country's sales or stimulate new business. If the UK doesn't have enough that China or India wants to buy then a free trade deal with those countries would simply mean the UK buying a lot more from them and selling a little bit more. Free trade for an uncompetitive economy is almost always damaging rather than helpful.
The UK already has a massive balance of payments problem caused by our lack of international competitiveness. We are about to go through at least 2 years of business uncertainty over whether we will have access to our biggest market. The Brexit economic strategy, if it is possible to dignify it with such a grand name, appears to be that we will exit the EU, sign free trade deals with the rest of the world and that will shock our sclerotic businesses into a growth spurt which will eventually take us to the sunny uplands. Magically the free market will come to our aid and solve all our problems. Just as it did in 2008!
The alternative is to recognise that we are in a rare circumstance where inflation isn't a major immediate worry. But going into exit with a serious balance of payments deficit is. To get us out of this and smooth our way through the exit the Bank of England is going to need to print a great deal more money - probably every bit as much as the original £375billion. One of the key questions we now need to be asking of the government and of the Bank of England is what are we going to have to show for all that money this time round?
Will we once again discover that it has all gone and the only result is a temporary shoring up of a brittle financial sector? Or can we use this money to get the UK ready for the major change in technology which is now underway? Over the next 20 years the world is going to move very rapidly away from a dependence on fossil fuels. Is the UK going to equip its businesses and its people with the skills, the science and the investment that is needed to survive and prosper in that environment? Or are we going to lurch along from one temporary crisis management to the next as the exit gets ever closer without any fundamental changes in how the UK's economy functions?
I leave you to judge which is more likely as you listen to the candidates to become our unelected Prime Minister outline their vision of the future.