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Categories:Politics

MP attacks King and his "debauched" monetary policy

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Conservative MP Douglas Carswell has attacked Mervyn King’s economic record accusing him of failing to take action against a pre-crisis credit bubble and pursuing the wrong policies in trying to deal with the aftermath of the crisis.

Writing on his blog, Carswell, who has a keen interest in monetary policy, accuses King of presiding over a Monetary Policy Committee which consistently made the wrong decisions. Pre-crisis interest rates sat between 3.75 per cent and 5.5 per cent between 2003 and 2007. Carswell says this was“recklessly low” and encouraged a credit bubble. Carswell says King mistook the bubble for sound economic growth.

He says: “Once that bubble burst, it was Mervyn’s Monetary Policy Committee that slashed rates further, hoping to cure the patient by giving it more of what made it ill. At almost every stage he has talked of deflationary dangers as inflation has been taking hold. The MPC has consistently failed to meet its inflation target for years.”

The Bank has already pumped £275bn into the economy in quantitative easing, and experts expect more is on the way. Carswell says if the MPC continues down the road of “debauched monetarism”, the economy will not improve.

He says: “Rather than maintain sound money, Mr King’s bank has engaged in a massive bout of monetary stimulus, attempting to engineer economic growth. With almost every passing day it becomes clear that Mervyn’s print-more-money, provide-cheap-credit approach has failed; debt remains larger than ever. The banks remain zombies, and, to cap it all, we seem to be drifting back into recession.”

Speaking on Tuesday, before figures were released showing the UK economy shrank by 0.2 per cent in Q4, King (pictured) said in a speech in Brighton “there is no reason to despair. All crises come to an end”.

Carswell says: “Gulp. If this all-crises-must-come-to-an-end line is the best our top economic technocrat can come up with, it is hardly reassuring.”

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Readers' comments (9)

  • And Douglas Carswell's answer would be???

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  • Hindsight is a great thing and Mervin King did warn about a housing bubble as early as 2004 if memory serves me right. It is worth noting that politicians did nothing to prevent a housing bubble as they were too busy swapping properties and claiming expenses on these properties. Call me a cynic.

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  • Merv inherited a banking system completely out of control who`s bluff had just been called and had come up potless. The country needed low interest rates just to stay viable. I presume Carswell has a small mortgage on a large house or two and loads in the bank, well done Carswell but joe public are thankful Merv is doing waht he can instead of sniping at people trying to do their best!

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  • I do find it hysterically funny when politicians start pointing the finger of blame and are NEVER at fault themselves no matter what party they are from.

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  • Yes--quite Marty.
    As usual the gentlemen issuing the criticism are right with hind-sight. I don't remember Mr Carswell piping up prior to 2007.
    I suspect that handled in any other way we might by now have 4,000,000 plus as unemployed.

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  • This just shows why policitians shouldn't get involved in economics, if interest rates had been increased instead of decrease after the credit crunch we would be in an even deeper recession than we already are!

    Douglas, stick to history as per your degree and leave the economics to the economists!

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  • "there is no reason to despair. All crises come to an end". That's what the chief dinosaur said 20 million years ago. It looks like we have another dinosaur in charge.

    Whilst King might have been talking about a housing bubble back in 2004 (so was I even without the benefit of a hugely overpaid cadre of so-called experts to help me), he did nothing about it. The least he should have been doing was restraining the banks enthusiasm to lend outrageously unaffordable sums to anyone who could sign a form and to have outlawed some of the worst malpractices (a la RBS). He did NOTHING !!!

    He has presided over dismal failure and yet he is still in post. We are still being forced to listen to his gloomy guff and he is still being allowed to make far-reaching decisions e.g printing more money without any tangible assets to back it up.

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  • I agree with Carswell.This man (King) who MUST have known what was coming at the UK via the US and who MUST have had extensive inner knowledge within the city was happening after the NR collapse a full year earlier was still contemplating interest rate increases in August 2008.During the entire year from August 2007 what exactly was the man doing in charge of the BOE?? Preparing for the crisis that was surely on its way?? He did nothing.The amount of rhetoric from the BOE on threats to the UK is practically on a dialy basis.Contrast that before Oct 2008 when there was silence.And they want to give him more power?? He should have been sacked on the spot,along with Mr Sants.

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  • If we accept that the banks were mainly at fault for the current situation it does gall me that the BoE is still contemplating printing more money to give them.
    The banks now play the "we have learnt our lesson" game and are hording these funds rather than pushing into the economy and getting that working.
    IF more money id needed how about putting it ninto the economy through the population in some form so that more can be spent - of course epople will say that is a "risky" thing - giving peiople money but so far the supposedly non-risky way has failed to work.
    Also, if we do not use a degree of hindsight how do we move forward - we need to look back and identify what went wrong, why and on who's watch and ultimately heads do need to role!

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