Labour’s love lost at Old Lady
AFTER the ‘embarrassing, embarrassing, embarrassing’ Uturn on the fiscal charter, Labour’s shadow chancellor John McDonnell has come up with a real doozy.
He has decided to put Ivy League economist Danny Blanchflower in charge of his review of the Bank of England. This is like asking Bob Diamond to take over from Mark Carney as chairman of the Financial Stability Board, putting Hugh Grant in charge of freedom of the press or asking Arsene Wenger to conduct an independent review of Jose Mourinho’s Chelsea.
As someone who served his time on the Bank of England’s Monetary Policy Committee, Blanchflower was ahead of his time in suggesting interest rates be slashed amid the approaching financial crisis.
He might look at first blush to be just what Jeremy Corbyn needs as he sets about flying the red flag over Threadneedle Street.
The truth is that Blanchflower’s wild forecasts and his unpleasantness about former colleagues at the Bank make him unsuitable to con- duct a review. In spite of his reputation as a labour market economist, he could not have been more wrong on what Tory government policies would do to unemployment in Britain. He said it would reach five million as a result of Coalition austerity. Instead it has headed in the opposite direction and currently stands at a shade under 800,000.
Still, what are four million jobs or so among friends?
Then there was his forecast that youth unemployment would create permanent scars.
At 13.3pc it is among the lowest rates in Europe, compared with 50pc or more in Spain and Greece. George Osborne, we have been told, can only make matters worse ‘with his lunatic plan for austerity.’
Yet last week the International Monetary Fund reminded us that Britain will be the second-fastest growing advanced economy this year and in 2016. When it comes to the Bank of England itself Blanchflower descends into vitriol.
Writing in the New Statesman in 2012 he describes former governor Mervyn King as ‘a tyrant’, a term generally reserved for the likes of Pol Pot, Saddam Hussein or Bashir Assad.
‘King has controlled the Bank with an iron fist, slaying any dissenters in his path,’ Blanchflower wrote.
Maybe, but along the way King did cut interest rates until they were zero bound, carried out £375bn of quantitative easing (while the European Central Bank and others sat on their hands).
He was largely responsible for sacking the UK’s most toxic banker Bob Diamond and the recapitalisation of the UK banks.
For those who have forgotten, Blanchflower’s choice for governor post King was Stephen Green, former executive chairman of HSBC. Never mind that i t was under Green’s watch that HSBC soiled itself with money laundering in Mexico, sanctions-busting in Iran and operated a Geneva branch engaged in every manner of bad behaviour from sheltering the ill-gotten gains of African autocrats to tax avoidance on a grand scale.
We all make mistakes but Blanchflower’s judgement does often seem a trifle off-beam. Wasting his valuable time on a review into the Bank might also interfere with his neverending cascade of tweets, some 60,600 since April 2012.
That would be a true economic catastrophe.
Barnacle Bailey
CHRISTOPHER Bailey insisted that he add the job of chief executive to that of resident genius designer when he donned the trench coat worn by Angela Ahrendts in 2014. He may now be wishing that he had stuck with his cutting scissors.
Burberry shares plunged 8pc yesterday as it dawned on investors that China, where it generates 30pc of its sales, might not be the best place to be right now. Much of the money is being spent in Japan, Italy and France, where Burberry is less well placed.
After all, the fashion group has 17 stores in Hong Kong alone which may be a little careless now that the Pacific region is slowing rapidly.
In recent times Burberry has flashed its digital credentials as evidence that it is a company ahead of its times. It might have been better to follow the money.
Emerging crisis
THE strong message from l ast week’s IMF meetings in Lima was beware of emerging markets and the build-up of some $3.3trillion of private sector debt.
It is not just China that is looking into the vortex. Barely a day passes without a profits warning from firms that have invested in newly rich countries now suffering from the commodity collapse. Burberry’s problems in China are just one manifestation. The global Swiss based pesticides and grains group Syngenta (one of the offspring of Britain’s ICI) has just reported a slump in Brazil which accounts for up to 45pc of sales. That cannot be a good signal for BAT, Diageo or other UK companies heavily exposed to emerging markets.