The Bank of England Is Helping to Fuel ‘Monetary Schizophrenia’ Around the World Says Albert Edwards


Albert Edwards, the notably pessimistic strategist at Societe Generale, let rip at central banks. He accused them of “monetary schizophrenia” regarding their approach to policy.

The strategist directs most of his frustrations on the Bank of England. He accuses the banks of raising a consumer credit bubble while warning about the dangers increasing consumer credit levels at the same time.

“The simple fact is monetary policy is way too loose in the UK as well as in the US, and let us not forget the BoE cut rates in the immediate aftermath of last July’s Brexit vote. Bubbles are appearing in areas like consumer credit because interest rates are far too low and need to be raised,” writes Edwards in his weekly Global Strategy note.

Quoting a recent article by the economics editor of Sky News, Ed Conway, Edwards remarks that Bank of England has just increased its Term Funding Scheme to around £15 billion.


The Term Funding Scheme is described by Conway as “one of the most technical, abstruse schemes” ever formulated by the bank. It was brought in last August when the bank’s interest rates were cut.

The primary reason behind the scheme was to try and ensure that retail banks continue lending to customers if the economic situation in the United Kingdom deteriorated and to make sure that lower rates were passed on to customers.

That was achieved by lending large amounts of money to those banks via the TFS — as it is commonly recognised.

“By engaging in this scheme while also warning about the dangers of growing consumer debts and record low household savings, Bank of England Governor Mark Carney is making himself look ridiculous,” states Edwards.

“This makes Governor Carney’s cautious statements about consumer credit look ridiculous and takes BoE monetary policy to a new level of schizophrenia.”

Edwards argues that when the credit bubble pops, the Bank of England will ultimately be faced with widespread anger when the public realises the role that the bank has — in his view — played in inflating the bubble.

“Yes, when interest rates are excessively low, both borrowers and lenders do stupid things. But to ignore their own role in creating debt misery for millions, the BoE can only deal with its own cognitive dissonance by blaming someone else. When this debt bubble blows, I suspect citizens’ rage will be directed where it belongs.”

Edwards has remarked a similar point regarding “citizens rage” before, stating in a note released in June that in the coming years, central bankers will become the ‘next sacrificial lambs to throw to the wolves’ of populist rage.

His criticism is not entirely focused on the Bank of England and its governor, Mark Carney.

Edwards continued: “I do not think this debt time-bomb is specific to the UK. We are in a QE, zero interest rate world, where central banks are effectively force-feeding debt down borrowers’ throats. They did it in 2003-2007, and they are doing it again. Most of the liquidity merely swirls around financial markets, but there is certainly compelling evidence now of a consumer credit bubble in both the UK and US (as well as a corporate credit bubble in the US).”