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.”