Sweden cut its rates by a massive 1.75 percent, bringing the base rate down from 3.75 percent to 2.00 percent.

The cut in British interest rates was part of a general move by the world’s central banks in response to the deepening recession. The European Central Bank (ECB) cut its rates by three quarters of a percentage point. By the standards of the ECB, this is a huge cut. Over recent months, it has never cut by more than one half of a percent. Interest rates in the Eurozone now stand at 2.5 percent.Sweden cut its rates by a massive 1.75 percent, bringing the base rate down from 3.75 percent to 2.00 percent. Sweden’s action was in response to worsening economic data. Growth of 0.1 percent had been anticipated, but the latest figures point to a contraction of 0.5 per cent in Sweden’s export-oriented economy.Even in this context of sharply deteriorating economic conditions across Europe, the situation facing the British economy looks more serious than elsewhere because of its dependence on finance capital and cheap credit.The fall of the pound has led to speculation that Britain may have to join the euro. European Commission president José Manuel Barroso recently said that he thought British membership was “closer than ever before.”
“Some British politicians have already told me: ‘If we had the euro, we would have been better off,’ ” Barroso told French radio.
Foreign Secretary David Miliband and Lord Mandelson, the business secretary, are thought to be the most likely government figures behind these rumours. But even the Conservative shadow chancellor, George Osborne, has adopted some of the arguments being advanced by economist Buiter, a strong advocate of the euro.Osborne warned that the government’s fiscal stimulus package and the huge increase in government borrowing that it entails could cause a run on the pound. His concerns were ridiculed by Anatole Kaletsky in the Times of London, who argued that “…in the modern world of paper money and floating exchange rates, there is no such thing as a ‘reserve currency’—only different currencies that are traded and used as stores of value in the same way as other assets.”Kaletsky agreed with Sir Samuel Brittan of the Financial Times, who recently wrote: “The most frequent objection is to ask: ‘Where will the money come from?’ The short answer is: the Bank of England printing works in Debden. This is not just a debating reply. In a paper currency system there is no fixed pot of money, but a total influenced by human action.”While this could, Kaletsky admitted, lead to Zimbabwe-style inflation, under present deflationary conditions such an outcome was not inevitable.Kaletsky’s articles are in their way quite chilling. They demonstrate that policy options that would until quite recently have been denounced as actions reserved for megalomaniac dictators have entered into the realm of, if not the desirable, then at least the possible, for sections of the British political elite.

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