Is the lifeblood of the UK economy being drained away?

IMF Chief Kristalina Georgieva says high interest rates are causing World poverty, linked to substantial economic slowdown.

To put this into domestic context, between 2008/09 and 2020/21, the number of food bank users in the UK increased every year, from just under 26,000 to a staggering 2.56 million.

The human cost is obvious, but I was shocked to also discover more than half of NHS trusts and health boards are either providing or planning food banks for staff, as the cost of living continues to soar. Moreover, new polling from Ipsos reveals that 67% of Britons believe the worst of the cost of living crisis is still to come.

So not unreasonable to conclude the UK economy is not exactly awash with excess liquidity? Where there are any personal savings these are are being quickly eroded, by the massive increases in energy and food prices. Steep rises, caused in the main, by the ongoing external supply driven consequences of the Russian war with Ukraine.

But wait, not so, according to the Bank of England (BoE) which has determined UK record inflation is is not being driven by external factors,?but by the UK consumer masses.?

Presumably by eating and drinking too much? Using too much energy keeping their homes too warm? Or is it simply the new ridiculous notion that the chief culprits, are retirees, spending far too much on leisure?

There was a moment recently when Catherine Mann flexed her MPC muscles, and announced?that corporate ‘Greedflation’ can be controlled by increasing the base rate.?

Regardless, it has been deemed a domestic problem and any external factors have “washed through” according Mr Bailey and his 'Monetary Policy Committee' (MPC) team.

My thoughts on the MPC lead me to conclude their actions might, not unreasonably, be compared to the medieval practice of bloodletting? Here we have in the 21st century, economic ‘bloodletting’ in the form of continuous interest rate hikes over the past 15 months now, cutting deeply into the UK economy.

As many will know, the medieval practice was based on a very limited understanding of the full consequences of attempting to cure the disease in this reckless manner…..think about it.?

Cuts were made and the lifeblood was typically drained until the person collapsed, or worse.

Not dissimilar to draining the UK economy with constant interest rate hikes until we all collapse into disastrous recession, or worse.?

Raising interest rates is supposed to divert liquidity from overspending to saving. But with millions already in poverty and the ongoing energy cost increases making matters considerably worse….this leaves very little ‘excess liquidity’.

But no matter, regardless of food banks and the IMF warnings, a certain Mr Bailey and his expert MPC team at the BoE are resolute that by ‘cutting’ into the economy with higher interest rates, it will encourage the people to save and the inflation disease will be cured!?

I really think not….

Whilst long-term inflation expectations currently appear anchored at the acceptable level of around 2%, I fully accept the risk of de-anchoring and therefore acknowledge the need to raise interest rates; but not at any price.

In this regard, we unfortunately appear to have a BoE governor and his group of MPC experts who are delivering a biased myopic vision, which is entirely inconsistent with the needs of ordinary people wishing to work and adequately support their families. They fail abysmally to recognise the obvious financial hardship already being caused.

Not so dissimilar to the bloodletting 18th century physicians, who were ultimately discredited. Their practices became recognised for causing far more harm than good…