In full: Former BoE Governor warns of a "very unpleasant period" ahead
King headed Britain's central bank from 2003 to 2013, and oversaw the start of its QE programme in March 2009 during the global financial crisis.
But in more recent years he has criticised the scale of central bank asset purchases, which were funded by newly-created money.
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All Comments (21)
What people like King never admit is that after a period of 10% inflation, even if inflation then falls back to the magic 2%, prices are still 12% minimum higher than they were a 18 months before. Prices will never return to where they were before huge inflation struck, thus the demands for huge wage rises will persist in the medium term.
Isn’t it amazing how all these people suddenly develop 20/20 vision after they leave positions of power where they could actually have done something about the problems and causes they see so clearly
Very good interview. Refreshing to finally hear someone with authority pointing out the money printing as the main cause for the inflation
I work in customer service for an energy company, seeing peoples bills almost double is just awful 😖
How can we get to almost 20 mins in this interview and not talk about the inflated stock market, the inflated housing market, the number of zero contract jobs....the role of crypto currencies, the roll-out of CBDC.......incredible.
The Central Banks have been printing big time since 2008, which has been devaluing the purchasing power of our currencies
The BoE have failed miserably to control inflation and the value of sterling. Inflation hit 5% after the first chunk of QE in 2009, now 10% after the pandemic QE chunk. Rather than reversing some of the money printing to strengthen the pound, I think the BoE will re-start the printing press again when the recession hits.
I was waiting for Mervyn King to speak on this subject to see whether his opinion confirmed my own suspicions. I have always though King was a man of great integrity and pragmatism, he did not disappoint. We hear much about the cause of inflation from our clueless politicians and economists, the pandemic, Ukraine, supply chain, energy costs and the rests. These elements are contributory of course but do not run to the true cause. The true cause is the continuous dilution of our currency through endless quantitative easing. We are living beyond our means and have been doing so for many years and I fear a rude awakening beckons.
Especially since WW2, western economies work efficiently with inflation between 2.5 to 4 percent, together with increasing asset ( mostly real estate & equities ) and commodity values.
Deflation is a horrid scenario for central banks, manipulated scarcity of goods and commodities overcomes this catastrophe with instant inflation.
"inflation stayed 2% since than till now"
Well I calculated my living inflation from 2005 to 2020 and came across to figures from 4-12% a year. Region of the Netherlands. Items included were salami, rice, eggs, swimming ticket, plane ticket, shoes, electronics, kebab, rent. A secnd way to see the official inflations figures are manipulated/not truth was to compare minimum.wage at burger king as opposed to price of a whooper menu. In 2010 i could buy 2 to 2,5 menu's for 1h of work while in 2020 it came to 1,3. That is an inflation of 100% in 10 years. Annual inflation calculate yourself.
With other words we were delibaretely manipulated OR we are dealing with morons with a lot of power and fancy suits.
The moment I realised that i sold my money and as much as possible hedged against inflation.
This is the man who kept interest rates artificially low until the banking crisis. Well done.
It breaks my heart seeing that just a few can see where the surplus that we humans produce is going...to the pockets of - again - just a few.
Except this time there's way too much debt in the whole system to raise rates to where they should/need to be. Great for Gov's to inflate away their debts but as usual hurts the regular working person
People in general are seriously spooked by the increasing energy costs, which along with food costs.
We gone from " full bore, flat out" to "throw the anchor out " and have stopped spending on anything but essentials.
Massive job losses and the mother of all recessions is beyond doubt
A very informative interview. "Stuff happens" so forecasts are always likely to be wrong and the King Canute theory of money supply were good points. Also, i like that he showed an empathetic understanding for the impacts of people on low incomes and the ripply effects of that through the wider economy.
Government requires inflation to manage debt, central bank is trying to help create it, not fight it. Inflation is stealth tax.
What if the aim of the exercise was to create inflation via QE. With the pandemic as the justification and the reason(s) to erode existing debt accumulated during the years of low rates.
The inflation has been directly caused the Bank of England for keeping interest rates too low for too long and engaging in in reckless quantatative easing for decades. The BoE has monerised the debt created by The Treasury.Private Banks - Barclays, HSBC, RBS, create 6 - 10 billion each year of electronic money from thin air and use this money to speculate in the money and real estate markets. This drives up the prices of property, energy, food, etc.
The corporate financial economy is fully global - the reach of any central bank is just within its currency’s area. General wealth and ownership have concentrated immensely since 1980 and most nations have sold off (privatised) institutions, assets and outsourced earlier ownerships. In my view, this has left governments and democracies (if applicable) unable (or unwilling) to remedy what unregulated financial growth has created.
Growth can no longer mend the lack of resources on a global scale. Even a green shift will be dictated by the corporate sector, not by governments. Financial (non-producing) growth disenfranchises more people than it enables, as QE benefited finance itself, not the majority of non-owners - meaning wage takers of any kind, even well earning families. From now on, housing, energy and food will be out of reach for normal well educated individuals, and that’s different from 1929, 1989 and 2008. It’s also a condition in every country in the global north, also unlike earlier financial downturns.
Inflation is a problem because of the Central Bankers of the West. None of them should have the autonomy to slash interest rates to the level that they have. Money should be a store of value, retain its purchasing power and receive an acceptable rate of return, otherwise, it will eventually become just a worthless piece of paper whilst the price of tangible assets skyrockets.