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Bank of England governor warns UK facing ‘sober’ decade

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The Bank of England governor Mervyn King has warned that the UK is set for a ‘sober’ decade as it looks to recover from the financial crisis.

Speaking to the Black Country Chamber of Commerce on the eve of the Spending Review, King said that the next decade would be defined by “savings, orderly budgets and equitable re-balancing”.

He said: “The next decade will not be nice. History suggests that after a financial crisis the hangover lasts for a while.”

King warned that countries must not fall into the mistake of trade protectionism to avoid the same fate seen by the global economy in 1930s.

He said greater prudence in this country would be the UK’s contribution to a “grand bargain” that countries worldwide must strike to see off the threat of protectionism and avoid a “disastrous collapse” in global economic growth.

King said nations must set aside self-interest and draw up a plan for common economic reform. Countries in deficit like the UK must save more, he said, while surplus nations like China, need to “shift away from reliance on exports”.

“All countries accept that global rebalancing is necessary,” he said. “But there is … a disagreement on the appropriate time path of real adjustment.

“Surplus countries need to move slowly so as not to de-stabilise growth while deficit countries “are under near-term pressure to reduce the burden of debt”,

King also warned that it may be some time before the UK inflation target of 2 per cent is reached.

King did raise hopes of further quantitative easing given that the present amount of money in the economy was still “barely growing at all”.

King said it was a “key role” for the Bank to provide economic stimulus when needed.

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Comments

There are 3 comments at the moment, we would love to hear your opinion too.

  1. It is VERY clear in my view that another round of QE is on the way, but what will be the key is the TYPE of QE it is. Mr King said before the start of QE to the effect it was unchartered waters and we will learn from it as we go allong. This is also very true. I have my own views on how QE may be handled in the next round to ensure that it reaches the parts of the economy that other beers do not reach – but I await today’s spending review from the government before bursting into print.

  2. The problem with quantitative easing, is the money gets poured in at the top so large organisations can use the money while it’s relatively cheap. By the time it gets down to smaller business and consumers, they pay through inflated prices.

    It’s unfortunate that small businesses and consumers who have not gone on a spending binge over the past decade or so, have to pay for the reckless government and organisations who have. I don’t believe for one minute that the top banks, corporations and government didn’t know the game they were playing and where it was leading.

  3. More of the same old.... 20th October 2010 at 4:39 pm

    We are all having to pay for the “recklessness” of the Bankers – so it should be the Bankers that pay – I don’t mean the banks – but the Directors/CEOs – their assets should be seized in the same way assets of those who benefit from crime have their assets seized. After all these bankers acted or allowed crime to take place, they appear to have acted beyond their mandates (ultra vires). Any businessman who acts outside the scope of his M&A is committing an offence – surely this is what happened. But no they continue to reap huge bonuses or walk away with massive Pensions ( above the limits too!) or perhaps promises of Knighthoods if the bailout the Government?

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