Friday, 21 September 2012

Governor King got it wrong

King at last states the bleeding obvious. If the economy is not growing the government should stop making things worse by continuing to cut. 

It is a conversion of a kind, from the man that up until recently was four square behind the government’s debt reduction plan. King acted as Hardy, to Osborne’s Laurel. And it was a fine mess that the two of them got the country into. 

But in his first live interview for years, Sir Mervyn King acknowledged the weak pulse in the country’s economic body consequently more cutting would kill off any hope of recovery.
He now sees it as “acceptable” to miss the self imposed target that Osborne had set for clearing the deficit. Well, hooray.  

It doesn’t require a PhD to work out that if the economy is on the skids you don’t improve things by taking more money from people’s pockets to prevent them from spending on goods and services. 
King's utterances will be good news to the Liberal Democrats on the eve of their conference in Brighton. The prospect of tax rises and more welfare cuts in chasing an economic policy based on debt-cutting would have caused more unhappiness in the rank and file attending the south coast resort this weekend..
Now at least they can talk about how to stimulate the economy and reject the tired old mantra of cuts and more cuts. Even they realise that time is getting preciously short to turn things round. 

It’s the economy, stupid. And it’s health determines whether they’ve any chance at all of saving their political skins next election time.
Now they can at least hope that the conference darling, Vince Cable, will announce some economic goodies that might bring some hope to a party that has sunk behind UKIP in some recent polls.
It will be interesting to see whether the Liberal Democrats in government will have any influence on Osborne’s Autumn statement which strangely is delivered in winter - December.  
Osborne and the Treasury will have a lot to explain. They have been wide off the mark in predicting spending and tax receipts.  But no surprise there, then. They’ve been consistently wrong throughout this economic crisis.
From the start they’ve been widely optimistic. Like the dutiful hack that I am I recall sitting in the Commons hearing Osborne predicting that the economy would grow by around 5% by the end of 2012. Oh, how he wishes. 
Instead the Osborne cuts, with King as his cheer leader, produced the opposite. Growth evaporated and a double dip recession is what, as we say in the valleys, occurred.
Sir Mervyn has at least acknowledged the Bank of England got it wrong. 
Is it to much to ask with one politician saying “sorry” this week that Osborne will also say “mea culpa”. Humility and Osborne don’t readily come to mind. The odds of him holding  is hands up and say “I got it wrong.”  are roughly the same as you’d get on a snowball’s chance in hell. But we live in hope.


  1. Yes, I've always thought this BoE governor had got it wrong. And I think he has got it wrong. Ask anyone at the Bundesbank and they'd agree with me!

    As for your ideas of trying to spend our way out of this crisis, it is perhaps easy to understand why you ended up in journalism.

    Reduce the size of the State, lower taxation, allow asset prices to plummet and start raising interest rates. Pain for sure, but as with any illness, pain goes away and the patient either lives or dies.

    So much better than trying to live off life support!

    1. Sorry to say Gareth but it seems to me you want the UK to follow the same path as Japan. And they've had around 20 years of stagnation. You either suffer a hangover now....or a bigger one in the future. There is no painless way out. And I don't vote Conservative nor Labour. Ach y fi.