Sunday, October 23, 2011

Enough of Mervyn King and the economics of La La Land| Will Hutton

9:41 AM | Posted by Free Game Zone | | Edit Post

Governor of the Bank of England seems to believe that the European sovereign debt and banking crisis has thrown the restoration of Britain off track. It is wrong

Britain backs against the wall, besides the war, our situation has rarely been so serious. However, our political and financial appear unable to square up to the depth of the challenge. Fighting in the cabinet are among the companies secretary Vince Cable and his colleagues. Wired, more aware of the seriousness of the moment that the minister almost any other, the fear that the government's strategy for growth, to be announced next month, will be considered low. He needs other ministers to share their concerns and propose specific policy initiatives for the benefit of the common pot.

But the way we analyze and discuss our situation is crazy backwards. The Department of Commerce, which has some interesting ideas on how to promote innovation, is intimidated by the larger political priority by taking the "burden" on businesses, ostensibly to stimulate growth. However, in most benchmarks, the United Kingdom and the member is more lightly regulated in the EU. It is absurd that characterize the regulation and bureaucracy as the main sources of the evils of the United Kingdom. It's voodoo economics.

Meanwhile, the unfolding story of a coalition reflected the austerity plans was signed on the road only derailed by the crisis in the euro area - the result of the mad project of creating a coin is unique in Europe. The enemies of the play are so deceived by the Europeans against the company officials, unresolved global imbalances, excessive regulation and the rate of 50 cents more in taxes on income, not to mention the legacy Gordon Brown. There is nothing wrong - or at least this line will - with the economic strategy of the coalition of the pants

is a story that many people with power and influence - in finance, business, politics and the media - who believe that their support to cover the epic misjudgment of the coalition when he took power. It was the decision to withdraw the application at a rate of 2% of GDP each year for four years because of the greatest financial crisis in our history, with debt levels higher than the private sector, even in Japan before loss of two decades of growth.

"madness", wrote that when the strategy was announced in 2010. "The closest thing to a scorched earth economy that ever lived." Without the export boom of unprecedented investment of the proposed adjustment within four years was impossible.

apologists The Talisman is Sir Mervyn King, Governor of the Bank of England, which, as our representative, perhaps the most intelligent of economic orthodoxy, it can put the best gloss on the other unjustifiable. He admits that this is perhaps the worst financial crisis in the history of Great Britain and last week said there is a risk of stagnation of the recovery. But after winning praise for his frankness, and invites us to join him in La La Land. Before the sovereign debt and banking crisis hit Europe, sang: "We were on track."
  • No, they were not. The growth in the fourth quarter of 2010 was 0.1% and continued to flat line in the first six months of 2011. The UK economy has been shaken months before the crisis in the euro area. Indeed, the crisis could hardly have more serious consequences for the United Kingdom and, if not properly managed, could push the UK economy, chronically weakened by the austerity program of the coalition, with the recession . But to claim that means accepting yourself much of the blame and miss the opportunity to blame the foreigners.
Sir Mervyn is a great accuser of foreigners, who want urgent coordinated international action voluntarily, without a lot of constructive ideas so they can be. Had he chosen to do so, he could have used his authority to assert that it was important that the IMF has assisted governments in the euro area recapitalize their banks and the resolution of the crisis of sovereign debt. It could also be argued that the British government to grant credit facilities with the IMF to finance this type of intervention is an entirely different proposition in public spending on hospitals, the Eurosceptics, ready to whip up hysteria even further to combine both. Instead, Sir Mervyn held his peace.

On the key question of time - facilitating the flow of credit to companies - we were treated to an honest account of how few operations quantitative easing. The Bank focuses mainly, said the governor, in the purchase of government bonds rather than corporate bonds with money it prints. The gold market is the fastest way to 75 billion pounds in private hands since sterling bond market businesses, he said, is so small and in any event, the Bank must "not discriminate between different companies and sectors "in the way it works, a direct reproach to Lord Turner, chairman of the FSA, which recently submitted a proposal along the lines only discriminatory.

However, the market for £ 460bn of corporate bonds is not small. In the latest round of quantitative easing, the bank had "great object" of government debt spending your 200 billion pounds of cash: he spent most of - ? 199.7bn - in government bonds and a small £ 290,000. 000 in trade obligations ". / Aa>
addition, £ 50 billion for the purchase of bonds was spent on commercial rather than government bonds. Elsewhere in the public sector, such contempt for government instructions would be viewed as a serious act of indiscipline. This raises the fundamental question of whether the Bank's independence is being abused, the links between monetary policy, financial and tax after a credit crunch are now so strong that it can be de facto the Bank sets the entire frame. However, because almost no one understands the finances, the governor gets his revered is blue.


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