March 25th, 2009
06:54 AM GMT
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The cat is out of the bag in Britain in a big way. The warning by the governor of the Bank of England AGAINST a further large stimulus package was a slap in the face to Gordon Brown's government .It is in the very nature of Central bankers to be cautious – to proceed ponderously when others wish to rush, but Mervyn King left no doubt as to his views. ""Given how big these deficits are", King said, "I think it would be sensible to be cautious about going further in using discretionary measures to expand the size of the those deficits."

In Quest-speak Whoa....time to start worrying about how we are going to pay the bills when this is all over.

The Gov. was speaking before a parliamentary committee and would have been well aware of the bomb he was dropping on the UK governments head. Normally he would never be so blunt. Coming just a week before the G20 meeting it is an explosion indeed.....giving Gordon Brown's European counterparts Angela Merkel and Nikolas Sarkozy good ground for saying "hang on, even your own central bank chief believes enough is enough !"

The issue isn't more needs to be done: The problem is so much has been done already, in such a short period of time, and not just in the UK.

We have had record breaking cuts in interest rates (in less than two years they have fallen 5.25 per cent !) to record breaking lows. We have had record breaking Stimulus Packages and Bailout packages and we have seen central banks embark on record breaking printing of money known as Quantitative Easing. All of which will create record breaking budget deficits ! That's a lot of record breaking, even in record breaking times !

There is a tsunami of money slowly, but inexorably working its way through the economy. And all the Governor was saying was.....er....maybe it's time to watch and wait and see the effect of all of this stuff before doing anymore.

Let there be no doubt – all this record breaking stuff will have an effect and we will see it, albeit later rather than sooner. By which time it may be too late.

Which is why the Governor made his, almost, record breaking comments.



soundoff (5 Responses)
  1. Diana

    Dear Mr. Quest ,

    I agree with your comment and would like to add to it...

    It is clear that this constant influx of "new" money to fix the economic crisis will never be enough, as has been shown in the past 7 months of cash injections. Has there been analysis to date of how the previous injections have helped?

    Is there anyway the taxpayer can see where this money is going? Who is controlling and scrutinizing the cash going out of the treasury and insuring that it is spent wisely. Where is the transparency? Will this constant printing of new money create deflation?

    Lastly, it is clear that this economic crisis was caused by short term thinking, and as we are faced with a long term problem of a catastrophic nature i.e. the climate crisis. What amount of money is being spent to solve our next crisis, can we not learn from our mistakes and be proactive? What good will it be to save AIG, etc and in 20 years half the island of Manhattan is submerged?

    March 25, 2009 at 7:43 am |
  2. Peter Luttenberger

    Any Stimulus Plan is just a quick fixing for some time.
    Recessions an depressions will repeat them self over and over again like the past has shown.As long people wants to make profit from other people's needs,it's just a matter of time till the next crisis hits the world.
    Humans must understand that this world and it's natural resources are here for everyone .There is enough for everybody on this planet.

    Peter Luttenberger

    March 25, 2009 at 12:45 pm |
  3. Michael C. McHugh

    I always look at these things as a historian. In 1940, we were still in the Depression in the US, although not as severe as seven or eight years before. By 1942, with all the deficit spending on World War II, the Depression was over and we were well on our way to full employment and doubling the GNP, despite those high debts we were running up. (There was no choice, of course. To win that war and defeat Hitler and his allies, we were prepared to spend any amount, no questions asked.)

    To my my, though, it just proved conclusively that Keynes was right, once and for all. You really can borrow and print your way out of a depression, if you just spend enough and spread the money around generously. Like Keynes, I'd prefer to spend the money on roads, schools and hospitals rather than tanks, bombs and aircraft carriers, but it still seems that Obama is following a Keynesian recipe here with his gigantic budget deficits. As long as enough of that money goes down the ladder rather than to big banks and corporations, I can have no objection.

    March 25, 2009 at 6:55 pm |
  4. alex

    Dear Sir Richard Quest,

    Thank You for present live my pessimistic opinion about “green shoots”

    of economic recovery, instead of optimistic,Mr.BBKINGBen S. Bernanke -
    Reserve and the Chief Con Artists of the planet earth:

    Mr. Benjamin S. Bernanke-optimistic,even took this somewhat “optimistic” message ...
    because he can print it a lot of “green shoots”.

    So,Recovery NOT buds all around us and Dollars NOT growing out of the soil -

    “green shoots”growing out in Mr.Ben*s The Federal Reserve underground...

    Same for pounds ... Same for Estonian krones

    Helicopter Ben S. Bernanke’s Federal Reserve is dropping trillions of fresh paper.

    Indeed, the Federal Reserve’s Trade Weighted Exchange Index has fallen by 24% since 2001
    Since 1913 the dollar has lost over 95% of its purchasing power.

    To Save Or Not To Save – risk of the US Federal Reserve printing money.

    The Rothschild's Federal Reserve Bank makes money out of nothing.
    Under the Federal Reserve Bank Act, the bankers control our Planet Earth.

    The government has put up hundreds of billions of taxpayers’ dollars to rescue troubled financial companies – one of the most depersonalising and dehumanising experiences a human being can have.The Federal Reserve is PRIVATELY OWNED by Mr.Thomas D . Schauf.

    Yours sincerely,
    With Best Regards,

    Alex

    P.S.

    Great king, within this coffin I present
    Thy buried fear: herein all breathless lies
    The mightiest of thy greatest enemies,
    Richard of Bordeaux, by me hither brought.
    /William Shakespeare > Richard II > Act 5, Scene 6 /

    March 26, 2009 at 9:32 pm |
  5. Lauro Silva - Brazil

    I´d like to be told,or rather, explained how to avoid a giant inflation rate as a result of so many stimuli and bailouts allowed so far and others to come . The bull has to be held by the tail and not to keep it away when after, it will attack much more furiously. All the creators of the mess have been protected by unbelievable bailouts as the victims get nothing but to pay back until the last cent burrowed. The big shots have a passion to be gathered and posed for photos as they should be in a magnificent party of prosperity. Regardless of where they come from, all of them are alike taking their best of any moment in the first place. To expect any solution in earnst from them is a very sweet illusion. Governments and lawmakers of innumerable countries are bursting in happiness with too much money facilitating all kind of corruption,grafts,embellzements without accounting anything at all. Demagogy has been reaching the highest points of even pledging construction of one million houses with buyers paying 7 ,9 dollars a month installments. The gap between rich and poor has been getting more and more bigger with governments being not concerned about, just expecting the poor dying in the misery amid all kind of diseases, lack of education and security.

    March 30, 2009 at 1:36 am |

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