05 February 2009

Banking oblivion

So, as expected, the Monetary Policy Committee of the Bank of England has reduced base rates to 1%. I no longer think the Bank is independent - it's been cowed by the criticism of its role in the Northern Rock debacle.

This will further drive retail savers away from the commercial banks; building societies have less political pressure to reduce saver and borrower rates because they're not seen as 'guilty'. It also reduces the cost of government borrowing, at least where it has a captive depositor base, such as some National Savings products, and reserve deposits at the Bank of England.

So it's not inconceivable that this is part of a fiendish game plan by HM Government. Why? So that it can nationalise all of the banks, which will soon have little liquidity except that supplied from government schemes.