Duncan’s Economic Blog

Mervyn King: Political Hack

Posted in Uncategorized by duncanseconomicblog on June 24, 2009

I don’t mean to be disrespectful to the Governor but he really should shut up. Actually, scratch that, I do mean to be disrespectful to the Governor.

It is perfectly right and proper, and indeed necessary, to have a rational discussion on fiscal policy. Government debt, the size of both public spending and the tax burden are the matters that should be discussed by rival politicians of the left and right.

However it is simply not acceptable for the Governor of an independent Central Bank to wade into this area.

It’s not his job. The quid pro quo of the Government not interfering in monetary policy is that central bankers stay out of fiscal policy. The issue is not the rights or wrongs of what the Governor has said. The issue is that he has spoken on this issue at all.

This is the  second time in a year that Mervyn King has strayed from this basic principle.

The charitable interpretation of his last entry into the fiscal debate was that it represented not an attack on Alistair darling but an attack on Danny Blanchflower. Given Blanchflower is no longer on the MPC this excuse no longer holds any water.

The Governor has now firmly placed himself in the political area and is acting as a political figure. This is very similar to Alan Greenspan’s last years in office, especially his vocal support of Bush’s tax cuts.  As Harry Reid, then Senate Minority Leader, said in 2005 Greenspan had become “one of the biggest political hacks we have here in Washington.”

The Governor is now a political hack. I honestly hope that there is no connection between his attacks on the Chancellor and the Tory plans to expand the Bank’s role.  I also hope that the fact that George Osborne’s chief economics advisor (Matt Hancock) is a former Bank economist who used to be Paul Tucker’s (the current Deputy Governor) private secretary is not relevant.

But these questions have to be asked. When you behave like a political hack, you get treated like one.

On a side note I submitted the following FOI request to the Bank on the 26th May and am still awaiting a response:

Dear Sir/Madam,

 

I am writing to make a Freedom of Information request.

 

Could I please details of any meetings between Bank staff (especially the Governor, Deputy Governors and other executive level staff) and representatives of the Conservative Party (MPs, Peers, MPs’ and Peers’ staff and other employees of the Conservative Party) over the past 12 months?

 

Could I please have the dates of such meetings, any minutes or papers prepared for them and a list of attendees (from both the Bank and the Conservative Party)?

14 Responses

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  1. John said, on June 24, 2009 at 4:45 pm

    “The quid pro quo of the Government not interfering in monetary policy is that central bankers stay out of fiscal policy”

    Meanwhile, on May 15 2008, the Prime Minister said: “”I want interest rates to be able to come down if we can keep inflation under control. What we are trying to do as a government to make it possible to cut interest rates”.

    In January the same year, here’s Alistair Darling: “‘Because of the fact that we now have low unemployment, we’ve got historically low inflation [a slightly odd comment given that inflation was above target and rising], low levels of interest rates and mortgage rates, the Monetary Policy Committee has room for manoeuvre”

    • duncanseconomicblog said, on June 24, 2009 at 5:07 pm

      Neither comment says ‘you should cut rates’.

      Neither is different from Osborne’s position of ‘not doing anything that stops the BOE cutting rates’.

      It is simply wrong that Central Bankers talk about fiscal policy. And I’d say that if I agreed with the Central Banker.

  2. Mr. Mxyzptlk said, on June 24, 2009 at 6:06 pm

    Mervyn King should of resigned a lot happened on his watch which he hasn’t taken responsibility for…..Banker him a big banker too

    Apropos your f.o.i request

    I am reminded of Henry Kissinger story who once Claimed he hadn’t spoke to someone.

    and when challenged admitted to speaking to them But “only over the phone”

  3. Mr. Mxyzptlk said, on June 24, 2009 at 6:22 pm

    I put you FOI request on me Blog
    as more read my blogs than yours….Snigger …snigger

    You are my second favorite after pesto of course (shrugs shoulders)
    But you knew that anyway

    Plus you are right waz mervyn up to we need to know

  4. Tom Freeman said, on June 25, 2009 at 6:18 am

    Duncan, I take your point about a Bank Governor commenting on fiscal policy in an election year when the parties’ main attack lines are well known, but the picture’s not quite as simple as the media have made out. King also criticised the idea of debt reduction starting now – a Tory policy.

    • duncanseconomicblog said, on June 25, 2009 at 6:38 am

      Tom,

      True – but I’m sure he knew which aspect of his comments would get the most attention.

      Even ignoring the narrow party politics of the issue, he really shouldn’t be discussing this.

  5. newmania said, on June 25, 2009 at 7:53 am

    It’s not his job. The quid pro quo of the Government not interfering in monetary policy is that central bankers stay out of fiscal policy.

    Oh crap as you know quite well Brown has been running monetary policy via place-men I daresay King hates his guts because he has been blaming the regulatory system which he designed then mis-used , then disowned. King can say what he likes, this is not your Stalinist state yet , and if you make as many enemies as Brown has they are going to come for you when you’re finished .
    In any case these are extraordinary times and we need trusted figures to speak out against the lies being propagated not only by the Labour Party but to a lesser extent and tacitly by Conservatives who are ,lets face it, pretending you can ring fence Education the NHS and International Aid ( F crissakes) and cut spending by 10% … Ha !
    You know this is true it was you who alerted me to the back of a beer mat realities .Incidentally what strikes me about your , very readable and fragrant blog , is that you seem to get all the approach work right , and then at the end decide one and one equals five. I suspect this intellectual self harm is caused by your plans for advancement in the Labour Party .If that is the case why should anyone take what you have to say other than with a Gulag of salt .

    • duncanseconomicblog said, on June 25, 2009 at 8:52 am

      Newmania,

      To be fair it was Borwn that made ther BOE independant – so it seems strange to complain about ‘place men’.

      I would disagree if the Governor was arguing for a bigger fiscal stimulus too. I don’t think he should be commenting.

      On your final point – I don’t think i have much chance of advancement in the Labour Party.

  6. Paul said, on June 25, 2009 at 8:28 am

    Duncan, marvellously marvellous post, and I love the FOI request which like Mr Unprouncable i’m tempted to copy straight over.

    In fact, for the first time ever I think, I do have a certain sympathy with NM’s view on the right of Mervyn King to express his own opinion; the more key issues are that a) he’s wrong b) there is a pressing need to bring to wider attention why he’s doing it.

    On b), some of that why is perhaps tied up with his own self-interest need (and that of those close to him) to curry favour with the people he thinks are going to be the next government, and that makes the FOI request perfectly valid as such insider dealing needs to be exposed. But perhaps more important is that Mervyn King probably genuinely feels that fiscal ‘rectitutude’ is absoltely essential for the good of the country, because he understands all too well the power of, ooh let’s just say Standard & Poor, to leave the UK deep in the pooh by downgrading credit ratings, or even by threatening to; in this more strucutural interpreation Mervyn Kin is simply a tool of the wider force of capitalism regearing itself for its next bubble etc. etc.

    The problem is that this is not an easy analysis to ‘sell’ to a wider public which has all the institutional forces around it offering the ‘safe housekeeping’ interpetation of events and how to deal with them.

    While it may make sense at one level to try and silence Mervyn King, the main problem is not that he is now speaking out but that the ‘depoliticisation’ by New Labour of monetary policy through BoE indpepedence means that he has a louder, better hward voice than he might have had; it’s no surprise that he’s taking a mile when he’s been given an inch.

    Could the BoE be properly repoliticised? I’m not sure, but I think it’s worth exploring in the light of the institutional abuse now at hand.

    • duncanseconomicblog said, on June 25, 2009 at 8:56 am

      Paul,

      Thanks for the kind words.

      As I’ve said to Newmania – I don’t think BOE officials should comment on fiscal policy.

      But that’s a side point. I really think you are on to something about the power of finance. It’s not quite the 1931 but the ‘gnomes of Zurich’ are cauising problems.

      I’m not sure the BOE could be repoliticised. It would sent a very strong message to the ‘markets’ that would cause problems. Once the genie is out of the bottle it’s hard to force it back in.

      There is though the example of Fed Chair Marriner Eccles, who whilst keeping the Fed independent understood it’s role.

      http://en.wikipedia.org/wiki/Marriner_S._Eccles

  7. Jane Pir said, on June 25, 2009 at 11:13 am

    Poor Mervyn, he’s just watching an economic train crash happening and just trying to warn the passengers.

    It may be outside the mandate of his paid job, but its well within the realms of his expertise. He has a moral obligation to warn us if he believes that the current government are destroying our future.

    Duncan, you often put up graphs of gilt yields telling us that debt is not important while the cost of servicing the debt can be kept down. I disagree with your position on debt because we do not know the future cost of servicing the debt and any cost in servicing our debt is too high to leave to our children. This legacy is simply immoral.

    I was please to hear Mervyn also disagrees.

  8. newmania said, on June 25, 2009 at 11:26 am

    Newmania,
    To be fair it was Borwn that made ther BOE independant – so it seems strange to complain about ‘place men’.I would disagree if the Governor was arguing for a bigger fiscal stimulus too. I don’t think he should be commenting.On your final point – I don’t think i have much chance of advancement in the Labour Party.

    To be quite fair it was Brown who picked up John Major`s plans to make the B of E independent which he was not able to action because they were a requirement under Maastricht which Conservatives resisted and at that time he lacked the clout . Brown was obliged to do it for the same reason Blair was obliged to promise no tax cuts and to stick to Tory spending , because Labour were still seen as a Party who would wreck the economy to pay off their friends probably using economic levers for political ends and to hell with the consequences
    Remind you of anything ? It was well organised because John Major , who really knew his stuff ,was the architect .The young Brown had little idea and soon reneged on the spirit . You would not say anything if King was arguing for a bigger fiscal stimulus , you are a lying hound !

    On your final point , why on earth do you say that ? If you have anything on your records worse than swotting too late in a built up area I `ll eat my stash .( Now I really have problems ). I think you would be very good actually.

  9. Paul said, on June 25, 2009 at 11:35 am

    Newmania

    Can I take it, then, that you would support a cross-party campaign – starting in the blogosphere and then spreading like wildfire into social networking tools and on into the maintsteam media – to have Duncan appointed fortwith to the House of Lords (there’s no time to waste with election to parliament and then immediately made Top Economy Minister Who Actually Knows What He’s on About and Can Prove It?

    Duncan, if NM is backing you for big office….your country needs you.

  10. newmania said, on June 25, 2009 at 12:47 pm

    Why the house of lords , is it the persistent rumour that Duncan is the love child of Prince Charles ? Its just a pair of ears you know !


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