The Guardian’s view of the UK financial crisis: Lots of blame for everyone | Editorial
AAnd so we come to the scene tediously familiar to even the most casual observers of this conservative drama: the action after another huge debacle, where the main supporters are looking for a scapegoat. In the weeks since the collapse of the mini-budget, the rampant hunt has been particularly notable. Liz Truss has blamed his chancellor, Kwasi Kwarteng; he blamed queen’s death; his business secretary, Jacob Rees-Mogg, blamed Bank of England Governor Andrew Bailey on Wednesday, and the Bank repaid him (with interest, one might say, if that word wasn’t a reminder horrible), with its senior executives repeatedly asking the blame at the feet of ministers.
So far, so predictable – just like the usual buffet of U-turns and confusions. At Prime Minister’s Questions on Wednesday, Ms Truss backtracked on her no-fault eviction ban and left observers scratching their heads as she swore there would be “absolutely” no cuts in public spending. Since the full budget is supposed to show how well the government will close its budget deficit, by providing spending cuts, one can guess that even more of the mini-budget is now heading for the trash. It would be a highly unusual move and would leave Mr Kwarteng no choice but to resign – yet this government has been so precarious and chaotic in its six long weeks that it may be the safest and safest course of action. the wisest.
While the Prime Minister and his Chancellor are inevitable targets in this blame game and deserve the opprobrium that follows, not enough importance is given to the silent man in this drama: Mr. Bailey. Threadneedle Street is also deeply involved in this crisis and has a case to answer.
Central bankers can play a positive role in a meltdown. Markets just marked Mario Draghi’s 10th birthday this summer promising that his European Central Bank would do the trick.everything that’s necessaryto extinguish the conflagration of the continent’s sovereign debt crisis. Those three words have done far more for global GDP than any number of corporate tax cuts. When the Bank of England began its emergency response two weeks ago, it could have been a similar end of chapter. This was not the case.
The Bank does not want to put an end to a crisis, but sees its role solely as providing liquidity in markets in great difficulty. One of Mr Bailey’s predecessors, Mervyn King, toed a similar line during the 2007 credit crunch, warning that investors who had gone wild in good times now had to pay for the losses and that any help would constitute a “moral hazard”. The argument is perfectly valid – until a crisis strikes. Lord King ultimately had to change both its argument and its policy.
Today, the Bank is making a similar bet. It would be wiser to give in – as his former governor had to – and show more support. In a noisy context, the Bank was also a poor communicator. Just this week, Mr Bailey said his intervention will end on Friday – hours before Bank staff are reported to have said otherwise. The Bank then said it would definitely return to business as usual. As far as management goes, it’s up there with the great old Duke of York. When the story of this mess is written, there will be plenty of blame to be had, mostly on the government. Currently, an equitable portion should be held in reserve for Mr. Bailey and the Bank.