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The Bank of Goldman Sachs at Threadneedle Street

As I provided a detailed analysis of the National Accounts release yesterday, today, I am writing less via the blog and am shifting the Wednesday music feature to Thursday. That makes sense. Today, I am bemoaning the creation of the Bank of Goldman Sachs, formerly known as the Bank of England. Groupthink seems to plague this institution. And then, to restore equanimity, we have a music tribute to Lee ‘Scratch’ Perry who died in Jamaica this week.

Bank of England Groupthink – redux

In this blog post – Bank of England Groupthink exposed (January 8, 2015) – I discussed the response by the Bank of England to a report from the UK Treasury Select Committee (House of Commons) demanding the Bank act in a more transparent manner.

The Select Committee Report (November 8, 2011) – Accountability of the Bank of England – noted that even with reforms to the committee structure within the decision-making bodies of the Bank:

Groupthink will inevitably remain a potential risk … [and] … The avoidance of groupthink is the responsibility of the Bank of England …

At the time, the Bank published the almost complete minutes of the meeting on January 7, 2015.

The press release – Bank of England Court Minutes June 2007 – May 2009 (January 7, 2015) – is still available.

However, quite amazingly, the Bank no longer provides this document in the usual place where the minutes are published.

But, if you do some detective work (I am reading the Maigret books at present in my spare time!), then they are still available in non-consolidated form here:

1. Court of Directors Minutes – 2008 (book 1) (pdf 1.9MB)

2. Court of Directors Minutes – 2008 (book 1) (pdf 1.9MB)

3. Court of Directors Minutes – 2008 (book 2) (pdf 1.7MB).

4. Court of Directors Minutes – 2007 (PDF 1.2MB).

So something odd is going on there with respect to these documents. The juiciest ones return an error when the link provided is clicked and the Bank has removed the consolidated document from the original (and easily accessible) location.

What I learned from the Minutes at the time was that the former governor of the Bank, Mervyn King, did not fully inform the governing body of the bank of the impending collapse associated with the GFC, despite acknowledging that a liquidity crisis was approaching.

As the crisis approached during 2007 and 2008, the Court, which is like a board of directors, were obsessed with discussions about open days, which mates they could install on the Monetary Policy Committee, and senior executive salaries and pensions for senior staff.

Just after BNP Paribas revealed how exposed it was to the sub-prime market (the first real public disclosure that would then precipitate bank failures across the world), the Court was being assured that the system in place in Britain – the so-called ‘triple oversight’ model run by the Bank, the H.M. Treasury and the Financial Services Authority – was robust and ensured there would be no crisis.

A few days later, they reconvened after Northern Rock signalled failure and the need for a massive bailout, and the Court voted to bailout their pals.

The Minutes reveal that, even when specific questions were pursued by individual, non-executive directors of the Court, the executive members played a ‘straight bat’, deflecting the questions with a sort of unified resistance.

The Chair of the Commons Select Committee said that:

Even when questions were asked by individual non-executive directors, the executive usually presented a unified front to the Court, apparently rendering it of little or no use as a forum for creative discussion and constructive challenge

The Minutes revealed that the Bank of England has become trapped in a destructive and dysfunctional Groupthink.

In 1972, social psychologist Irving Janis identified group behaviour he termed ‘Groupthink’, which is a:

… mode of thinking people engage in when they are deeply involved in a cohesive in-group, when the members striving for unanimity override their motivation to realistically appraise alternative courses of action (Janis, 1982: 9).

[Reference: Janis, I.L. (1982) Groupthink: Psychological Studies of Policy Decisions and Fiascoes, Second Edition, New York, Houghton Mifflin].

It “requires each member to avoid raising controversial issues” (Janis, 1982: 12).

Groupthink drives a sort of ‘mob-rule’ that maintains discipline within the group or community of decision-makers.

These communities develop a dominant culture, which provides its members, with a sense of belonging and joint purpose but also renders them oblivious and hostile to new and superior ways of thinking.

the governance of the Bank of England clearly fell prey to the neo-liberal belief in the efficiency of private markets and the need for deregulation and freedom from oversight that emerged in the 1970s.

The surge in Monetarist thought within macroeconomics in the 1970s, first within the academy, then in policy making and central banking domains, quickly morphed into an insular Groupthink, which trapped policy makers in the thrall of the self-regulating, free market myth.

At the time, the Court was comprised of a number of people who the Bank itself eventually acknowledged “had standing conflicts of interest, and there was no provision for a non-executive chairman (to compensate for that”.

You will get a better impression of the breathtaking Groupthink on display at the senior levels of the Bank of England by reading my discussion in the blog post cited above.

One of the best ways an organisation can insulate itself from the tendency to get trapped in this sort of destructive group dynamic is to ensure there is diversity of background and opinion expressed at the decision-making levels.

The Bank of England continues to ignore that well-founded advice.

As informed readers will know, the Bank has appointed Huw Pill to replace Andy Haldane as its chief economist.

Why is that a problem?

For three reasons:

1. His previous work indicates that he is another vanilla New Keynesian/Monetarist type and all that flows from that.

2. He is another former Goldman Sachs employee (formerly Chief European Economist), who now occupies a senior position at the Bank – importing one ‘unified’ corporate culture into another institution.

3. He is a white, anglo saxon male from an Oxford University background (one of them).

The selection panel for the job had a former Goldman Sachs economist on it.

Former Bank of England Monetary Policy Committee member David Blanchflower wrote an Op Ed in the Financial Times (October 13, 2019) – Bank of England is a captive of groupthink – which was consistent with my earlier writings on the topic.

He wrote that:

When I sat on the MPC, I was the only person who had not been to Oxbridge and did not live in London or South East England. I was a lone voice when I argued early on that the data showed that a recession was spreading to the UK from the US. I am concerned that the current MPC is similarly homogeneous and the tyranny of the consensus continues to reign.

Former Governor Mark Carney came from Goldman.

The current Deputy Governor of the Bank, who will be the boss for Pill came from Goldman.

The British Chancellor worked for Goldman.

The British Chancellor’s former boss at Goldman is now head of the BBC.

The article in the Times (September 2, 2021) – Another Goldman veteran lands senior position at Bank of England – quoted a former Bank economist as saying:

The Goldman Sachs takeover is beginning to seem like more than a coincidence. You don’t want any institution to be so strongly bound up with the central bank. It starts to look unfortunate.

Another former Bank economist claimed, by way of deference to the decision, that Pill is “too opinionated and steeped in his own views” to be influenced by his Goldman background.

But that is why I listed three reasons for the problematic nature of the appointment.

We often read that a Report comes from an ‘independent’ think tank etc.

This just means independent of ‘government’ in some way.

But they never question the paradigmic diversity of a viewpoint.

A New Keynesian working at Oxford is no less independent than a New Keynesian working for some charity or for Goldman.

The paradigm unity is the problem when that is the only voice we hear.

Anyway, it doesn’t look like the Bank of England has learned much over the last 20 years – Groupthink persists.

MMTed update

To give you an idea of what we are working on at present, at – MMTed – here is a short update.

We are extremely limited by funding at present and we are working on ways to increase our resources.

1. As part of our development we have invested in a new platform, which we will release later in 2021, once the trials tell us it will work properly and scale to demand without hassling the user (avoiding bottlenecks on videos etc).

2. We will release a four-module course on monetary sovereignty around November 2021. This will be a short course that can be done in a day’s sitting although we will release it sequentially.

3. We are rebuilding the MOOC that we ran in conjunction with the University of Newcastle through edX in March 2021 and we hope to launch that again in late 2021 or early 2022.

4. We are filming the advanced course to complement the MOOC (which was an introductory course) and we hope to have that all produced by around March 2022.

You can contribute in one of two ways:

1. Direct to MMTed’s Bank Account – which is our preferred vehicle for receiving donations.

Please write to me to request account details.

2. Via PayPal – the PayPal donation button is available via the MMTed Home Page or via the – Donation button – on the right-hand menu of this page (below the calendar).

Please help if you can.

Music – Studio One – RIP Lee ‘Scratch’ Perry

The maestro of Studio One in Kingston, Jamaica – Lee “Scratch” Perry – died this week (August 29, 2021).

Rainford Hugh Perry was a Jamaican record producer and singer who was an early developer of the – Dub style – in reggae music.

His early days saw him work in – Studio One – in Kingston run by the omnipresent C.S. Dodd.

It was the leading recording studio and record label in Jamaica and most of the famous Ska, Rock Steady, and Reggae artists have recorded there.

He subsequently moved on to work with Amalgamated Records founded by – Joe Gibbs.

Later he opened his own studio, the famous – Black Ark Studios – where he started working with Bob Marley and the Wailers (again), the Heptones and others.

His catalogue is very long.

I first started listening to his work when he was releasing material on is own label working with the band – Upsetter Records – in the late 1960s and early 1970s.

I came across this music in the mid-1970s through the distribution arrangement Lee Perry had with Trojan Records.

The houseband was called – The Upsetters – and included all the big stars of the Jamaican scene and were Bob Marley’s original backing band before they became The Wailers.

I particularly can recommend the 1970 album – Clint Eastwood.

That album was before he had really refined his Dub techniques.

This album – Roast Fish Collie Weed & Corn Bread – which he released in April 1978 during his Black Ark days features Lee Perry on vocals and captures the degree of experimental recording and producing techniques that he had developed throughout the 1970s.

It features Geoffrey Chung – guitar, Earl Chinna Smith – guitar, Winston Wright – organ, Boris Gardiner – bass, Michael Richards – drums, Sly Dunbar – drums, Noel Simms – percussion and Billy Boy on guitar.

It is a very cool album.

This UK Guardian article (August 30, 2021) – Lee ‘Scratch’ Perry: 10 of his greatest recordings – is worth reading.

That is enough for today!

(c) Copyright 2021 William Mitchell. All Rights Reserved.

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    This Post Has 17 Comments
    1. Tweet yesterday by @EdConwaySky ‘Numbers guy. Likes charts’:
      “In other news, Rishi Sunak (ex Goldman Sachs) has approved the appointment of Huw Pill (ex Goldman Sachs) as the @bankofengland’s new chief economist. Pill will report to Deputy Governor for Monetary Policy, Ben Broadbent (ex Goldman Sachs).”

    2. Funny how brexit doesn’t include the UK’s central bank.
      Just look how a former goldman employee now rules the epistocracy in Italy.
      They are on both sides of the divide.
      And just think of what stemmed out of the goldman-led disaster in Greece, in the old days of the GFC.

    3. Bill,
      1. BofE Court of Directors Minutes 3 & 4 – “this link gives an error” – the links seem to work fine now.
      2. How on earth do you manage to have any “spare time”???

    4. Off topic, OK?
      I just thought of a way that the US Gov. could rapidly change its spending. It could have a UBI that is paid monthly to *everyone*. But it varies. The Gov. has many PSA to explain that one can’t count on the UBI payment until it is in the bank, because it varies.
      . . . This UBI changes the income of everyone based on what the Gov. thinks is too much inflation. Maybe the Fed. could be given the job of making the decision each month. Certainly, not Congress. Maybe the Pres. could increase or decrease the amount the Fed. decided on by no more than 10%, except not in the 6 mo. leading up to the general election.
      . . . This UBI could be given to every citizen or even legal resident. This would be additional money to reduce child poverty. Because the idea is to have a fast way to increase or decrease incomes in the economy, it is not welfare. If the ‘market’ is so wonderful, it follows that it can adapt to this new reality.
      . . . The yearly total amount can’t be tiny, because it needs room on the down-side to work. The yearly total can’t be too much either.
      . . . This is better than changing the interest rate, because it works by changing incomes directly, not indirectly. It is better for increasing inflation because there is no limit on the up-side. It can be augmented on the down-side after the payment has reached zero, by other monetary, and then, fiscal changes (like increasing the withholding amount by some percentage or having a surtax percentage that can be changed).
      . . . This can be added to the MMT JGP, they are not necessarily stand alone programs.

    5. Bank of England like any other central banks, I guess, seem to want to maintain financial stability using the tools that are available within the paradigm they hold.

      I believe that most CBs have risk management – plans and strategies. Some very good, others may not, but they can mostly answer to the challenges within the adopted paradigm and its boundary.

      Paradigm breaking in organization, especially in an old institution can largely result from understanding and implementing the concept of “change” (with concrete roadmaps and actions).

      But in general, many fields of studies also have shown that humans survive best by “adapting”, not changing.

      So, status quo and plodding along occur until once in a while, humans learn that this strategy (adapting) fail to help anybody survive. Often it is too late like kodak, Nokia, combustion based mobility industries and so on, have shown as examples.

      But often “change” requires a new positioning, a new process, a new way of doing things/thinking altogether.

      Rarely, individual(s) can do that by herself especially in an institution, as it requires organization wide policy changes in the conceptual, their implementations, and new practices with continuous reinforcement must be put in place.

      And, in lot of times, only “groupthink” can only help deliver all that until they become the new norm.

      Thus, accountability we desire usually will be confined to the paradigm we adopt, not outside it.

      Otherwise, the old school boys clan and its mentality won’t be ruling today.

      I guess, in that sense, come to think of it, when it comes to central banking, they are doing ok, financial stability and etc. they are not the change agent. They are rules upholders.

      What is not ok is the policy making part in many societies and the people themselves that has to change.

      We see this change taking place in mainly 2 countries as far as I can see – the US and China, judging by the massive amount of policy changes with matching financial support required.

      The question is how can this “change” mindset spread to other places as well, that is the key I think…

    6. M. King said in his opening remarks: {Thursday 11 September 2008} :
      “In the UK we face a difficult but, temporary, period during which inflation will remain high for a while and output growth at best weak. . . . But provided we do not impede the required adjustment we will come through this temporary period and resume a path of normal economic growth with inflation close to target. . . .
      Provided we focus on bringing inflation back to target, our present difficulties will prove to be temporary. Inflation will fall back, and growth will resume.”

    7. Geopolitical

      That is the way I look at it as America is no different to the Greeks, Romans and the British.

      What is the difference between the Goldman Sachs people and two thirds of the banks and financial entities under ECB supervision that hold 346 seats in its own advisory groups. Out of the 22 advisory groups” that the ECB maintains. They have “517 representatives from 144 different entities: either corporations, companies or associations, mainly trade associations. All groups but one are completely dominated by financial corporations, and the number of seats taken by the private financial sector is an astonishing 98 per cent (508 out of 517). There is no difference.

      What is the difference between that group of thieves and the imperial political structure (comprising British India, a quasi-federation of presidencies and provinces directly governed by the British Crown through the Viceroy and Governor-General of India, Princely States, governed by Indian rulers, under the suzerainty of The British Crown exercised through the Viceroy of India.

      Or the list of governors of Roman Britain from 43 to 409. As the unified province Britannia. What the Greeks did when they conquered places. I see no difference apart from the US are in charge today and this is how they do it.

      MMT is the antithesis to all of that.

    8. … had the great privilege to see Lee “Scratch” Perry when he compèred the Meltdown Festival at the RFH… he booked some fantastic acts… including the Sun Ra Arkestra… my abiding mememory is them playing and marching in time down the auditorium steps to the stage… Lee performed a blistering version of “The Upsetter”… One Love… Rest in Power…

    9. Derek: MMT, it seems to me, is only a lens, a tool, which allows us to see and structure economic reality. It as easily informs the rich and powerful about how to maintain and enhance their position, as it instructs those of us who would change the neoliberal system into something more humane and sustainable. Thus, MMT is not the antithesis to the systemic evils that beset us. That antithesis would involve a mass-scale opening of eyes and changing of hearts, the instilling of reverence for people and plane, which is the domain of religion (in its widest sense), not economics. The left has long engaged in a futile struggle to put the horse behind the cart and push politically instead of spiritually.

    10. Most central banks as defined by their own constitutions or operating legislation have the primary roles of ensuring price stability, maintaining full employment and maintaining the stability of the banking system.

      In the neoliberal era the central banks have instead relied on almost totally ineffective and generally destructive monetary policy in an attempt to reduce inflation when required and more recently have been equally hopeless with trying to lift inflation up to the preferred 2% level. (Fail)

      Rather than maintain full employment the central bankers have instead deliberately performed the opposite by using monetary policy, and discouraging the use of fiscal policy, so as to maintain high ongoing levels of unemployment in accordance with the fraud of the Phillips curve or NAIRU. In addition unemployment statistics have been deliberately manipulated to understate the true levels of unemployment, underemployment and misemployment. In countries like Australia perhaps around 20% of the available worker hours are squandered as a result and those victims are also blamed, persecuted and forced to live in poverty for being the innocent victims of central bank and national government policy choices. (Fail)

      Rather than maintaining the stability of the banking system it is clear that the Goldman Sachs predatory squids and their many clones in the global world of politics and finance, engineer instability and have learned to profit greatly from both the market booms and especially the crashes and the subsequent recovery/consolidation periods. The Goldman Sachs blood sucking squids latched to the face of humanity ensure their chosen financial institutions are bailed out by the central banks following any financial crises, the rest of society is left to live or die without any such support and their chosen financial institutions are then in the hugely financial privileged position of being cashed up so that they can snap up the many bargains that may arise from the engineered crises. This is one of the main mechanisms by which ‘Wall Street’ has taken an ever increasing share of ownership of ‘Main Street’. Matt Taibbi’s excellent 2010 article appearing in Rolling Stone magazine ‘The Great American Bubble Machine’ which can easily be internet searched is well worth reading and clarifies the reality about Goldman Sachs and of similar insiders throughout the world. (Fail)

      The neoliberal era is not about incompetence based on inadequate understandings of macroeconomics but represents a deliberate systematic global coup d’état by segments of the world of finance driven by greed. The key players understand MMT and how such knowledge can protect and benefit them exclusively.

    11. @ Newton E. Finn,
      Sir, you are forgetting that MMT does have 1 policy that it demands be in place before it can be said that MMT is being used, the Federally funded, locally administrated Job Guarantee Program.
      . . . If this program was in place with the MMT required socially inclusive wage rate, it would go a long way toward making the economy more fair for everyone.

    12. This just reminded of this phrase…

      “… Mainstream economics is a cancer. A cancer that doesn’t just destroy the environment, schools, health care, and even countries, but that rots away what makes us human itself.” Lajos Brons

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