economonkey

Mervyn King explains credit crunch to senile politicians

March 26th, 2008

Today the Bank of England governor, Mervyn King, faced a grilling from the government’s Treasury Select Committee – a group of politicians who are responsible for scrutinising the actions of the Treasury, BoE, the FSA and various other organisations that are responsible for the UK’s financial well-being.

The Committee, understandably, wanted to know what the fudge was going on with this little ‘global economic meltdown’ problem, perhaps labouring under the illusion that Mervyn, or anybody else for that matter, actually has any real control over these things. You can read the full story over at the BBC, but in short, this is what Mervyn had to say for himself:

• The Bank will pump even more cheap loans into the money markets to help out incompetent financial institutions that are incapable of managing their own cash-flows. (Think about that for a second, these are the companies that the world trusts to competently manage their finances, and yet they struggle to manage their own cash-flow without needing constant help from the taxpayer.)
• Interest rates aren’t going down any time soon and even if they do, it won’t be by very much. (Can’t argue with him on that one, the US has already slashed rates to bargain basement levels and it’s done them a fat lot of good, other than to completely trash the value of the dollar. And its not like the banks are passing on rate cuts/rises to their customers any more either. )
• House prices will be stable for the next few years, but a slowdown in the housing market will make homes more affordable for first time buyers. (Utter bollocks. Unless house prices crash by around 50%, or salaries are magically doubled/trebled in the space of a couple of years, houses are not going to be anything like affordable for the average first time buyer.)
• The ‘real economy’ is OK, it’s just that the financial services sector is experiencing a few wobbles. (Um… isn’t the UK economy massively dependent on the financial services sector?)
• It’s a “matter of concern” that central banks’ efforts to improve inter-bank lending have been largely unsuccessful. (Is “matter of concern” a secret city-boy code for “please fetch me a new pair of pants, as I appear to have soiled the ones I’m wearing” ?)

Mervyn does a very good job of pretending to be in control of a situation which is pretty obviously far beyond the control of any one man, or even any one government. Still, maintaining the illusion of control is what these stuffed suits get paid so handsomely for, so he’s earned his salary today…

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