The Bank of England today raised interest rates by half a percent, in a move that exemplifies a panicked central bank. Interest rates are a blunt instrument and adjusting them abruptly and significantly hardly inspires confidence in the institution responsible. This surprise decision will have no substantial impact on inflation, but it will undoubtedly damage market and economic sentiment and repairing the resulting effects will take a long time. In a somewhat comical response, the pound did...

The U.K. financial system nearly broke this autumn when rising interest rates created a vicious circle of margin calls driving the stock market into free fall and with it a cycle of rising interest rates driving bond yields up causing further margin calls to the pension fund institutions. This kind of hidden danger is just what causes crashes. Pension funds had levered their government bond portfolios to the roof to reach for higher returns. Back in the day these same funds had been squeezed...

As governments spray money around in an attempt to keep the world’s economies afloat, bubbles appear, particularly in technology stocks, and engineers and technologies can take advantage. Money moves like honey: it flows and quickly gets everywhere. As the proxy for almost everything, money is an unstoppable force. So, when money sluice gates are opened as they have been all over the world, the cash floods into all sorts of nooks and crannies. Helicopter money, an idea coined by a previous...

Countries are toying with the idea of paying every citizen a universal basic income, but already governments spend more on behalf of their people than they earn. Technology is going to make us all unemployed, so they say. AI and robots are going to make us all obsolete, jobless and therefore starving. Even engineers and technologists will be replaced by mighty computing devices that will do a better job than the bald monkeys who created them. ‘Universal basic income’ is a proposal touted as a...

Engineering companies rely on the debt market to survive, so the prospect of the money supply being tightened in order to control inflation is not a happy one. Fortunately, tightening is not likely to be too extreme. In normal times it is still the case that industry cannot survive without a never-ending supply of debt from which to borrow. With the pandemic, the only way economies could survive pandemic countermeasures was for governments to artificially create great quantities of new money,...