I am not sure whether Vince Cable is correct in his assertion that the Bank of England's independence should be taken away on a temporary basis whilst we get through the worst of the financial crisis.
Speaking on Andrew Marr this morning in a three some with George Osbourne and Alistair Darling( is this the new face of inter party cooperation?),he felt that desperate times called for desperate measures.
It was interesting that Osbourne was not in agreement.Cable thinks that it must be deflected form its inflationary goal but as Alistair Darling pointed out it also has the remit for supporting the government's economic policy.
Cable reiterates his proposal in the Sunday Times this morning
Leadership will not come from a committee of economic ministers standing behind the chancellor, debating where to steer and fighting for control of the tiller. There has to be a sense of policy direction. Fortunately there are lessons to be learnt from previous financial tsunamis.
He calls for an immediate cut in interest rates of 2 percentage points and on Marr's show said that quarter or half percentage cuts were inadequate.
History teaches us that interest rates should be slashed during a banking crisis to stave off deep recession. This has happened in the United States, but not in Britain. The approach of the Bank of England’s monetary policy committee, dictated by its mandate, is to balance deflationary against inflationary risks with, in practice, occasional small adjustments in interest rates. The committee is in danger of becoming irrelevant in an environment where short and medium-term inflationary risks are massively outweighed by the danger of a once-in-a-lifetime collapse of the financial system
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