You do Mervyn King a very bad service indeed, David, when you claim that he understood the economy he was dealing with as Governor of the Bank of England, and backed the Tory-Salad austerity coalition anyway.
David Ignatius on April 24, 2013:
Mervyn King’s hard lessons in Keynesian economics: King is… one of those mild-mannered Englishmen who can dominate a room the moment he begins to speak, with a wry humor that can amuse, charm and eviscerate at will…. King… said events have shown that “purely monetary stimulus will not be enough…. Monetary policy is pushing on a string. It has some effect but less than we might have thought.”… For King, the past decade reinforced the lessons Keynes drew from the 1930s… the psychological quirkiness of investors… monetary policy could not persuade frightened people to spend and invest…. King couldn’t fix the British economy, but he did understand it.
Faisal Islam on August 10, 2011 on Mervyn King's support for the British Tory-Salad austerity coalition:
Mervyn King’s austerity assessment is music to the coalition’s ears: [The] striking thing about Mervyn King today was his absolute unwillingness to countenance the idea that austerity had in itself created new risks for the economy. He rightly pointed out that the austerity impact on reducing growth had to balanced off against the positive impact of reducing the risk of a UK government debt crisis. However he suggested in today’s press conference that these two factors “broadly offset each other”.
This assessment will be music to the coalition treasury’s ears.…. Against a backdrop of notable double-dip caution from central banks around the world, the Bank of England’s stance is, as he argues, “relaxed”…. [There] are concerns about growth, but Mervyn King went out of his way not to pin this on the austerity budget… sovereign debt risk has been swapped for… risk to consumer confidence. The Bank has backed up the coalition’s view that the first risk was more dangerous and damaging than the latter. As I put to the governor himself, that is a judgement call…
Mervyn King on June 16, 2010: Monetary Policy Developments:
Monetary policy must be set in the light of the fiscal tightening over the coming years, the continuing fragility in financial markets and the state of the banking system. I know there are those who worry that too rapid a fiscal consolidation will endanger recovery. But the steady reduction in the very large structural deficit over a period of a parliament cannot credibly be postponed indefinitely. If prospects for growth were to weaken, the outlook for inflation would probably be lower and monetary policy could then respond. I do, therefore, Chancellor [Osborne], welcome your commitment to put the UK’s public finances on a sound footing. It is important that, in the medium term, national debt as a proportion of GDP returns to a declining path.