Former monetary policy committee member David Blanchflower is calling on Bank of England governor Mervyn King to take radical action to boost growth or quit.
Echoing outgoing MPC member Adam Posen’s call to action today, Blanchflower says the Bank has chancellor George Osborne’s backing to do almost anything it can to boost growth.
He says: “We need a boost but King rules out fiscal policy, monetary policy and help with lending. Well, go and quit because if he cannot do it somebody else will. He cannot just hold up his hands in horror but that is what he is doing and down we go.
“My point is the Bank should be creative and find ways of doing something even if there are legalities to it. We have to start getting the money supply up and lending to small firms through incentives and guarantees to loans.”
Former chancellor Alistair Darling has previously given permission for private asset purchases and Blanchflower says FSA chairman Lord Turner also supports the use of non-conventional monetary and fiscal tools.
Blanchflower says: “It is just King being doctrinal, ideological and difficult because he is having a fight with Osborne. The reality is the Bank could buy almost anything such as mortgages, companies and foreign exchange.”
Blanchflower says the funding for lending scheme is flawed as it does nothing to address demand for loans which could be encouraged through more aggressive loan guarantee schemes or subsidies
The economist previously called on King to quit in 2010 when a massive leak of US diplomatic cables by Wikileaks revealed the governor had expressed doubts about the ability of David Cameron and Osborne to run the economy.