By Ann Pettifor 30th June 2013
I was asked by the Observer’s economics editor, Heather Stewart to submit a memo to Mr Carney on on 30 June 2013, the day before he takes up office as governor of the Bank of England.
The link here will send you to the Observer’s page with contributions from Lord Myners, Danny Gabay, Andrew Sentance and Pat Mcfadden MP. (Unfortunately in the printed edition the Observer described the 2068 gilt as a five year bond. It is of course fifty five years as corrected in the post below).
“Last week the UK’s gilt market suffered heavy falls and a rise in yields, as a result of turmoil caused by the Federal Reserve’s decision to drop long-term calender guidance on the direction of interest rates in favor of a new, less predictable outcome: the 65% unemployment threshold.
The 10-year UK government bond yield rose to 2.5% – way above the bank rose of 0.5%. on 25 June, the day of greatest upheaval, the UK’s debt management office committed British taxpayers to paying 3.65% for the next fifty five years on the 2068 £5bn gilt it issued. This rise in yields is bound to increase rates on the UK mortgages and loans, and lead to defaults. This will affect our zombie banks, weighed down by the worlds heaviest private debt burden.
As you know, the Bank of England does not help to co-ordinate monetary policy and the government’s (unwise) debt management, and long ago gave control over the full spectrum of rates – short and long, safe and risky – to the “invisible hand” of “submitters” in banks, such as Barclay’s, operating in the libor market. This misallocation of responsibilities is dangerous for Britain’s private debtors, so please give the determination of the full spectrum of rates your full attention.”