Mervyn King’s Final Curtain Call

Mervyn King, the outgoing Governor of the Bank of England played his last curtain call today in the play that is running at the Old Lady of Threadneedle Street as he took the leading role at the last hearing of the all-party Treasury-Committee in the UK. Did he fluff his lines and need a prompter? Only time will tell. But, the markets have been in turmoil over the recent tragedy that has been besetting the scene on international markets over the Federal Reserve’s Quantitative Easing being withdrawn last week. The sale of the century was on as traders scrambled to off-load. Those traders have ‘jumped the gun’ according to Mervyn King.

It would seem investors should have waited rather anticipate that interest rates be brought back to normal levels. This, according to King is not going to happen anytime in the near future. Is he suggesting that people wait until it’s too late to get out quickly and prevent making further losses and try to outrace the bullet that will be fired on the starting line? Anyhow, Mr. King knows only too well that there is no point in shutting the doors of the stable once the horse has bolted, is there?

£48 billion was wiped off the value of shares last week in the UK as there was a scramble for the doors. The FTSE fell by 189 points (just under 3%) and that meant the biggest fall that had been experienced since September 2011.The markets jittering has been exacerbated by the recent fears that the Chinese banking system is going to drag the rest of the world into tumultuous spiraling in a downward direction also brought about greater fears.

King stated that “we are definitely at the beginning of the end, that we are definitely at the point where we need to raise interest rates […] is a premature judgment”. But, Mr. King should know that when people start talking of possibility and ‘may-happens’, then the market reacts on that.

King went on to state that: “"At the present juncture, the committee believes that further asset purchases and targeted policies to restore the functioning of the monetary transmission mechanism, such as the Funding for Lending Scheme, represent more reliable tools for stimulating aggregate demand than does a further reduction in bank rate. But a reduction in bank rate, including below zero, remains an option which the monetary policy committee will keep under review lest circumstance change in the future”

Mervyn King gave one piece of advice to his successor, Mark Carney: that he should be true to himself: "He should be himself. Governors change. It is very important each governor should be himself … He must and I am sure he will be himself". Some might question what being ‘true to oneself’ actually means, these days. Perhaps a better piece of advice might be to be true to the economy rather than oneself.

King also spoke about the banking sector putting official s and politicians under pressure and lobbying them. King suggested that the banks had and always have considered themselves too big to fail. The money that they are given by the state has hiked pay packages given to the executives of those banks. But, if the banks consider themselves too big to fail, isn’t it down to the fact that they have been told and shown that they are indeed too big to fail?

The only other piece of news that was announced was that Jane Austen would be appearing on the £5 bank note. In April it had been announced that Winston Churchill would be replacing prison reformer Elizabeth Fry, causing quite a gender uproar as that would have meant that the UK didn’t have anything but male representation on their bank notes.

Winston Churchill £5

Winston Churchill £5

That was followed by the suggestion that the £5-note should be known as a ‘Winston’. A bit like monopoly money really, isn’t it. At least, one saving grace is that it would eliminate all knowledge of how much the British are actually spending every day as they buy their pints of ale at the local pub. Mine’s a swift half, please Mervyn! Here are two Winstons. Can I have some change? 

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