Inside investment: A Christmas Carol fit for a King
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Inside investment: A Christmas Carol fit for a King

QE has artificially suppressed the yield on government bonds, as it was supposed to, but the unintended consequences of unorthodox monetary policy might be felt for years.

Night lay heavy. Behind the velvet curtains of his elegant four-poster, Baron King of Chesham Bois slept the sleep of the righteous. He had served his country well, delivered it from financial crisis and maintained its triple-A credit rating.

No governor of the Bank of England could have done more in less auspicious circumstances, but as the last embers crackled in the grate of his fire, the dread lineaments of a ghost began to take form.

"King. Why do you lay asleep when your subjects fret and fulminate?" "Mmm, what?" mumbled King as the apparition loomed menacingly.

Although his management style at the Bank of England had been described by ill-informed commentators as akin to that of an absolutist monarch, King was not used to the idea that he had subjects. Through the fug of sleep, he drew himself up.

"I am the Ghost of Christmas Past," the apparition boomed. "You must rise and walk with me."

Across the chill London night, the ghoul guided King east, further east than he had ever been, except on a plane. Eventually, near Epping Forest, they alighted on a small semi-detached house. Within its walls, a worker at the Bank of England’s printing works in nearby Debden was toasting Christmas with his wife and a glass of Tesco’s finest Cava. "We’re property owners at last," said Bob. "Only a £250,000 mortgage, Mrs Cratchit – £1,700 a month and just about covered from my wages."

Mrs Cratchit looked pained. "Interest only, Bob, and four times our joint salary. I have to pay for the shopping on a credit card."

"Haven’t you heard about the Nice era of non-inflationary continuous expansion? This is the best investment we could ever make."

King was unimpressed. "Why are you showing me this, spirit? They have made a good investment. I’ve cut interest rates to zero. His mortgage payments will have fallen, house prices are holding up and there’s plenty of work at Debden thanks to quantitative easing."

King awoke anew in his bed as a second spectre appeared. He sneered: "Don’t tell me, you’ll be the Ghost of Christmas Present, I suppose? How bloody predictable."

The ghost said nothing. He had heard about King’s arrogance. Instead, he grabbed him and in one supernatural moment the central bank governor was back in Essex. The remains of a Christmas feast lay scattered on the Cratchit’s dining room table.

"What fine turkey!" exclaimed Bob. "The finest bird we’ve ever eaten."

Mrs Cratchit had eked out the turkey from Iceland with bread sauce, stuffing and sprouts. Tiny Tim was in a temper because Black Ops II was not in his stocking. "I don’t know what you’re so cheerful about, dad. We’ve had no treats since King stopped the printing presses and there has been no more overtime."

Bob felt sprout reflux rise in his throat. He suppressed the urge to belch sulphurously by downing the last glass of Australian chardonnay (£4.99 from Lidl). "Things aren’t too bad. We’ve been through a global financial crisis and we’ve still got the house, my job at the printers and mum’s at the supermarket. All thanks to Mr King, God bless him."

King smiled beatifically, but before he could say, "happy to oblige, mere mortals", he found himself once more abed. He took a sip of water and waited for the inevitable third and final visitation. The clock struck one and a new spirit appeared before him. "Get on with it," said King. "Show me the happy conclusion of this long night."

As they flew eastward beyond the Russian-owned enclaves of central London, King noticed that things seemed changed. There were many houses with ‘for sale’ signs, deserted streets and a dread chill in the air. They passed the Cratchit’s Essex semi. It was seemingly abandoned. "What is this?" demanded King. "What has happened?"

At a soup kitchen in Loughton, the Cratchit family waited. The merry Santa Claus hats of the volunteers could not dispel the crushing gloom. "I’m working all the hours God sends," complained Bob. "We’ve never been busier at the printing works."

"Money’s worth nothing now," said Mrs Cratchit, trying to look brave and festive with a red ribbon in her hair. "It doesn’t matter how much you make, Bob. Ever since that Lord Turner came up with the wheeze of cancelling the debt bought by the Bank of England, inflation and interest rates have been out of control."

For the first time that night, King was nonplussed. "Turner, what idiot gave him my job?"

The spirit declaimed: "The new chancellor, Ed Balls. Your protégé Tucker just wasn’t flexible enough. Besides, everyone says that fiscal and monetary policy are essentially interchangeable now."

The spirit did not finish his sentence. "Interchangeable? Debt cancellation – that’s monetary financing. No wonder inflation is out of control," King spluttered. "It’s just not cricket."

"Perhaps not," said the spirit. "But you changed the rulesof the game with QE. Anything goes now."

"Cricket does not have rules, it has laws, you specious spectral poltroon."

But as the expectoration flew from his lips, the governor’s words were lost. The phantom disappeared, and King was back at his desk in Threadneedle Street in 2012, clipping the coupons on gilts and sending them to HM Treasury for Christmas. He poured a glass of Madeira wine to dispel the awful visions of that night in the surely unreal future.

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