From Cameron McPhail.
THE asset bubble caused by unsustainably low interest rates has pop-ped with a vengeance. And the British government’s answer to the meltdown is to . . . er . . . dramatically lower interest rates.

Recently the government concluded that public expenditure was at its absolute limit and that any further increases would be reckless in the extreme. It now believes that massive and immediate increases in public expenditure are essential for the very survival of the economy.

During the past year the very low margin US-based sub-prime lending of the banks has resulted in trillions of pounds being wiped off bank balance sheets. The banks’ solution to the problem has been to increase dramatically the interest margin charged to its UK customer base.

Some two years ago, the government’s view was that the UK financial services industry was ‘a complex monopoly’ with all the associated anti-competitive pricing policies which this entailed. The government’s answer to this ‘deep-rooted and systemic’ problem is to merge two of the sector’s largest banks and thereby all but forget about competition.
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