March 25th, 2009
06:54 AM GMT
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.
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