Rishi Sunak ought to make it clear that it is the real economy that needs rescuing, not the City
For speculators, the cryptocurrency party was just starting. At the beginning of the year one bitcoin was worth £5,614 before almost reaching £30,000 at the end of last week. On Monday, Britain’s financial watchdog took the punch bowl away, by warning bitcoin investors that they could lose all their money. While it may sober up a few of the partygoers many will find solace in their bank balances. Anyone who bought cryptoassets at the beginning of the year was sitting potentially on a 400% gain, an extraordinary return in a year when a health crisis has morphed into an economic one.
Thanks to the government’s actions, owners of assets have had a very good pandemic. Shares in London are back to where they were in late February last year. House prices in 2020 rose by 6%, helped by the chancellor’s temporary stamp duty holiday. Economic euphoria needs a drug. It turns out that the dealer with the best supply of credit is the government. Its central bank has flooded the financial system with cash meant to be loaned to chase a positive rate of return. In Britain’s distorted economy investors, even in the midst of Covid, prefer to make outlandish short-term capital gains rather than income from productive investment.
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