Tuesday, March 24, 2009

Mervyn King is not Omnipotent

I suspect there's a lot of buzz surrounding what Mervyn King saidtoday, it's very much unlike him to make an announcement quite so political. It appears to be music to the ears of Davey C and his crew, but I think it's worth bearing a couple of things in mind.

Firstly, it's worth pointing out what King actually said:
Given how big those deficits are, I think it would be sensible to be cautious about going further in using discretionary measures to expand the size of those deficits.

This does appear to be far more noncommittal than "Britain cannot afford any further fiscal stimulus" which appears to be the headline of choice.

The second point is quite simply that Mervyn King is no super being, he could be wrong. After all in his six years at the bank he presided over monetary policy that led to the current situation. The bank was also considered to have been to slow in cutting interest rates under King's stewardship when the first waves of the financial crisis hit. King has been wrong before and he could be wrong now.

For my two cent's (for my opinion is worth little more) I believe that King is wrong in this case, I think we need to be forging ahead with another larger fiscal stimulus with the aim of investing in infrastructure and restructuring of the economy. I don't think now is the time to be losing our nerve.

Crossposted on Common Endeavour

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