Mervyn King attempted to pump a further £50 bn into the banking system but
was outvoted by the Bank of England Monetary Policy Committee
Scottish news: UK economic crisis may not be a 'recession'
The UK economic crises is deepening as new figures from the Office for National Statistics (ONS) confirm the economy shrunk by 0.4 percent in the final quarter of 2011.
The British economy, as measured by GDP, shrank by 0.3 per cent between January and March and by 0.4 per cent between October and December. The latter figure compares with a previous estimate of 0.3 per cent. A country is said to be in a ‘recession’ if its economy contracts over two quarters consecutively. However with UK debt continuing to skyrocket it is clear that GDP figures are supported by quantitative easing and bank leverage.
Fresh money printing supported by the Bank of England is likely responsible for recent GDP "growth" thus lending credibility to the idea that the UK has experienced a "double-dip recession".
As unemployment continues to rise and government deficits increase it is becoming increasingly clear that Britain is facing a major credit crisis not a recession.
- Red Collective launch independence referendum campaign
- Scottish independence risk to UK single market, says CBI chief
- Scottish independence 'No' camp launches
- Scottish people feel shut out of independence debate
- Bank chaos blamed on 'computer glitch'
What began as a financial crisis in 2008 has now become an economic crisis impoverishing families and destroying the citizen's wealth as Westminster and the Bank of England pump the public's money into what seems to many to be insolvent banks.
Earlier this month Bank of England Governor Mervyn King proposed adding to the quantitative easing tally by £50 bn - the equivalent of one and a half year's public spending in Scotland. The Bank's Monetary Policy Committee (MPC) outvoted Mr King, refusing to devalue the nation's currency any more.
This strategy appears to international investors as an attempt to stave off another banking crisis and impacts on the UK's international credibility.
Two week's later Chancellor Osborne and Mervyn King created a new programme that would allow the banks to receive a further £140 bn. Some analysts suspect this fund was hastily arranged after the MPC vote.
If further evidence of banks being in the same situation as 2008 were required, tomorrow the Bank of England will meet to discuss allowing UK banks to "relax" reserve requirements.
This meeting is set against the background of 15 British banks being downgraded by Moody's. The financial institutions are then required to offer more security as a result of their higher risk profile.
Financial experts believe the Bank's Financial Policy Committee (FPC) will recommend plans tomorrow to relax rules requiring banks to hold large amounts of cash as a buffer.
The press briefings state that this is about trying to release credit to businesses but to some analysts it appears that the banks are under water and being bailed out by the back door.
If banks are facing a solvency crisis then the first likely casualty would be RBS Group. The bailed out bank this month suffered a "computer glitch" which saw many customers across Britain and Northern Ireland unable to draw cash from their accounts.
Leveson inquiry for the banks
Internationally renowned economist Ann Pettifor has launched a petition calling for a Leveson-style inquiry into conduct in the British banking sector. The petition states "We the undersigned call for an independent, judicial public enquiry into fraud, wrongdoing and ethics of British banks, their management and their staff, and the role of the British Bankers Association."
Ms Pettifor is Director of PRIME Policy Research in Macroeconomics and a fellow of the New Economics Foundation, London. She is the author of books on sovereign debt and international finance.
To access the petition click here.
Support Our INDEPENDENCE REFERENDUM APPEAL