From Mr Derek G. Bevan
Sir, - Andrew Dickie (Letters,
30 August) should restrain his invective towards incorporated
bodies and their employees, and get back to basics - the basics of
economics and accounting.
When an item is charged to his credit card, there is indeed a
supporting entry, and money does change hands. The issuer of the
card (usually a bank) pays the retailer or provider of a service.
In order to do so, the issuing bank takes money from its reserves,
or from another customer's deposit; or it borrows, directly or
indirectly, from the central bank. Thus the Bank of England enables
(and controls) credit.
By quantitive easing, the Bank of England makes even more money
available, beyond what is supported by its reserves. This enables
the wheels of a depressed economy to turn as best they can rather
than have businesses failing left, right, and centre, and a massive
increase in unemployment. Consequently, there are risks that
inflation will rise, that lending will again get out of control,
and that the value of the currency will deteriorate, with
inevitable consequences for the cost of imports and for living
A return to "honest money", as some would describe it, would be
very uncomfortable indeed, and would undoubtedly bring forth howls
of protest, not least from ecclesiastical circles.
Mr Dickie may not care for developments in City markets over the
past 20 years or so, and no one, I hope, condones the wrongdoings
associated with LIBOR manipulations. It is, however, the
responsibility of government to formulate taxes and set the rates
at which they are collected, making appropriate adjustments if
revenue overall exceeds the state's needs or declines. To attribute
that function to those engaged in banking, and to criticise them,
whether in error or not, when tax receipts fall, is incredibly
As to his credit card, there is most certainly another side to
the book entry. Were quantitive easing to be reversed, credit
limits would be reduced dramatically, minimum monthly payments
increased, and interest rates enhanced. Then savers would be
rewarded at last, but consumers and businesses would suffer.
Unfortunately, the retrenchment, affecting current spending as it
would, could not be expected to leave levels of investment
unscathed. The economic activity of all of us is thus linked.
DEREK G. BEVAN
Stanford, 4 Petre Close,
Essex CM4 9SX