Fickle King could have approved a similar “textbook” stimulus package in 2007

Sir Mervyn King heralded the chancellor’s £140 billion stimulus plan but rejected a similar plan when Labour were in power in 2007.

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Governor of the Bank of England Sir Mervyn King yesterday heralded the chancellor’s £140 billion stimulus plan as a “textbook response” to the credit crunch, yet he rejected a similar plan when Labour were in power in 2007.

mervyn-kingIf yesterday’s stimulus plan had been approved by the Bank of England in 2007, Northern Rock could have been saved. Instead, King claimed such a stimulus package would “sow the seeds of a future financial crisis”.

During last night’s Mansion House speeches from George Osborne and Sir Mervyn King, it was announced that the Bank of England and the Treasury will join together to launch a “funding for lending” scheme, offering banks cut-price funds as long as they pass the benefits onto their customers.

It is hoped the stimulus will kick start mortgages and small business lending, preventing any further damage to the UK economy from the “debt storm” raging in Europe.

In his Mansion House speech yesterday, King said:

“We had to rebalance our economy because we had a trade deficit. So this was an absolutely textbook response to the situation.”

Osborne’s stimulus plan mimics similar measures enforced by the US Federal Reserve back in 2007, something a number of economists hoped would also be rolled out in the UK. However, in a paper submitted to the Treasury committee in September 2007, King rejected this idea.

 


See also:

Osborne’s inevitable pasty tax U-turn set to cost Treasury £35 million 29 May 2012

ECB bailing out British banks exposes coalition’s finance failure 27 Feb 2012

The coalition has flunked preparations for this banking crisis 10 Oct 2011

Will quantitative easing work this time? 9 Oct 2011


 

He wrote:

The provision of such liquidity support undermines the efficient pricing of risk by providing ex post insurance for risky behaviour.  That encourages excessive risk-taking, and sows the seeds of a future financial crisis.  So central banks cannot sensibly entertain such operations merely to restore the status quo ante.

King and Osborne may be supping up the praise for their recent announcement but underneath the smiles and congratulations, is King asking himself why he didn’t make this move when he had the opportunity five years ago?

 


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16 Responses to “Fickle King could have approved a similar “textbook” stimulus package in 2007”

  1. NewsatLeft

    Fickle King could have approved a similar “textbook”… //t.co/OqndWJLp #LeftFootForward #BankofEngland #GeorgeOsborne #MervynKing

  2. leftlinks

    Left Foot Forward – Fickle King could have approved a similar “textbook” stimulus package in… //t.co/Rgbi8V2L

  3. Political Planet

    Fickle King could have approved a similar “textbook” stimulus package in 2007: Sir Mervyn King heralded the chan… //t.co/wNfrzRRg

  4. Katie Stanton

    Mervyn – You can't call something a "textbook response" if you have already refused to do it once before //t.co/HUuXFAZO

  5. Nick James

    I believe the reason is simple. King is Tory scum, like the rest of them and adheres to the Tory principle of helping out his mates (Osborne) and fuck the rest.

  6. TechFaq360

    Fickle King could have approved a similar “textbook” stimulus … – Left Foot Forward //t.co/IlWkilXm

  7. Alex Braithwaite

    RT @leftfootfwd: Fickle King could have approved a similar "textbook" stimulus package in 2007 //t.co/ND3xjfoF

  8. Lord Blagger

    More simple. He did what Brown insisted on when Brown was in charge. When Cameron is in charge, he does what Cameron bids.

    At the same time, he knows what he is doing is going to fail. So he switches the fully funded (ie. no black holes, lots of assets unlike the public sector workers, state pension, state second pension ponzi), into inflation linked gilts. ie. He bets that he will fail in his primary remit of controlling inflation.

    What you have now is that King is starting to let on what he’s always know. It’s a ponzi fraud. The debts reported by government aren’t the real debts, just a fraction of them.

    What will happen is he’s about to take the retirement option because the debt shit is going to hit the fan, just like Greece. Include all the debts, and the UK is in the same mess.

  9. Cormac Hollingsworth

    RT @leftfootfwd: Fickle King could have approved a similar stimulus package in 2007 //t.co/uhwl69kD <<<< yes, why didn't he?

  10. Cormac Hollingsworth

    Labour wanted stimulus package, King said too risky. Tories ask for one, King says of course! : //t.co/HUuXFAZO

  11. Anonymous

    Blah blah PENSIONS MUST DIE.
    One-track mind.

    Pay up, fraud.

  12. BevR

    RT @leftfootfwd: Fickle King could have approved a similar &quot;textbook&quot; stimulus package in 2007 //t.co/JpPI8D52

  13. Foxy52

    RT @leftfootfwd: Fickle King could have approved a similar &quot;textbook&quot; stimulus package in 2007 //t.co/JpPI8D52

  14. Katie Stanton

    @RichardJMurphy The "textbook response" was actually a Labour idea that King rejected once already, five years ago //t.co/9pg6pRg3

  15. It is time to debate a new economy | Left Foot Forward

    […] See also: • Fickle King could have approved a similar “textbook” stimulus package in 2007 15 Jun […]

  16. Katie Stanton

    "George's latest idea" a.k.a the plan rejected under Labour in 2007 //t.co/9pg6pRg3

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