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Mervyn King, the Bank of England governor, last night stated that the Bank of England will launch two new stimulus packages in response to the worsening economic outlook. Together with the government, it will provide billions of pounds of cheap credit to banks to lend to companies. It will also offer banks access to short-term money to deal with “exceptional market stresses”.
Spinning the message of George Osborne, King in his Mansion House speech provided:
“Our recovery and rebalancing may have become more difficult, but they are no less important. Meanwhile the imbalances in the world economy still await resolution. It is an ugly picture. Leaders of the G20 will next week confront formidable challenges. In the United Kingdom, we can and will get through this. But it would be naive to pretend that any of us can know when the storms from overseas will have passed over our shores and the economic skies begin to brighten.”
However, King has presided over, and is firmly enmeshed in, a disastrous Downing-Street created recession. Ed Balls, who accurately forecast what would be the result of lack of sufficient investment in the UK, through lack of support for infrastructure projects such as ‘Building Schools for the Future’, increased benefits payment, a threat of inflation and unemployment, diminishing tax receipts, and an economy going in reverse gear from growth to a double-dip recession through customer demand suffocated by an increase in VAT, succinctly explained:
“What more evidence can David Cameron and George Osborne need that their policies have failed and that they now need a change of course and a plan B for growth and jobs? It’s now clear that this is a recession made in Downing Street by this Government’s failed policies. Despite all the problems in the euro area, France, Germany and the eurozone as a whole have so far avoided recession and only exports to other countries stopped us going into recession a year ago. The result is that Britain is now in a weaker position if things get worse in the eurozone in the coming months.”
According to a relatively recent article by Philio Aldrick, Economics Editor of the Telegraph, David Cumming, head of equities at Standard Life and one of the most influential figures in the City, said the Treasury must improve on Sir Mervyn when his second term expires in June 2013. George Osborne has provided that the appointment process will officially begin in the autumn, with the successor named before the end of the year. King has not particularly endeared himself with the City since the financial crisis. However, despite the underlying animosity, senior finance professionals have previously rarely spoken out so strongly against King. Mr Cumming said: “The current appointment in my view has been a disaster, so its important to get a better man this time round.”
Sadly the only thing that can save the economic reputation of Mervyn King and George Osborne is a full-blown Eurozone crisis. Thankfully also it has been predicted by Prof Steve Keen that the UK might enter a further credit crunch this year. Keen was interviewed by Paul Mason on BBC Radio 4 yesteday. He set out his criticisms of conventional macroeconomic theory and proposed how he would approach remedying the ongoing fundamental problems facing the global financial system. Towards the end of the interview he suggests not only that austerity policy is entirely inappropriate in the context of private sector deleveraging but also that the present excessively high levels of private debt in the UK mean another credit crunch is very likely. You can listen to the interview here.
This post does not represent the views of BPP or of the BPP Legal Awareness Society, a student society run at BPP. The author, Shibley (@legalaware), is currently President of the BPP Legal Awareness Society.
