The Governor makes a stand

Sailing very close to what is allowed under the terms of Bank of England independence, the Governor of the Bank Mervyn King has made a dramatic statement about how much scope the government has to launch a fresh fiscal stimulus when the delayed Budget is announced on the 22nd of April.

The Governor is clearly very concerned about the ballooning level of government debt and that monetary policy should not simply be discarded as the main instrument for supporting confidence and demand during the economic crisis. He is quoted as saying to the Treasury Select Committee that

“We are going to have to accept for the next two or three years very large fiscal deficits. Given how big those deficits are, I think it is sensible to be cautious about going further in using discretionary measures to expand those deficits.”

A2 economists should note this idea of discretionary measures i.e. a further deliberate easing of fiscal policy to boost aggregate demand beyond that which occurs through the working of the automatic stabilisers.
It is important that the Bank of England takes a stand when it feels that the government is in danger of losing complete control of its own finances.  It estimated that UK public borrowing will soar to 11 per cent of national income (£165bn) in 2010. And the total increase in national debt over the three years between 2008-09 and 2010-11 is set to be far higher than the £356.4bn inherited by Labour in the spring of 1997.

More here from The Times: King - ‘UK can’t afford any more stimulus plans’

Unit 2 Macro: Cyclical and Structural Economic Issues Facing the UK [23 May 2012]
Unit 2 Macro: Positive and Negative Multiplier Effects [20 May 2012]
Unit 2 Macro: Real Interest Rates [20 May 2012]
Unit 2 Macro: Bank Cuts UK growth Forecast for 2012 [16 May 2012]
Unit 2 Macro: Revision Notes on Supply-side Policies [10 May 2012]
Unit 2 Macro: Monetary Policy and Inflation Glossary [5 May 2012]
Unit 2 Macro: Trade and Balance of Payments Glossary [5 May 2012]
Unit 2 Macro: Fiscal Policy Glossary [5 May 2012]
Unit 2 Macro: Economic Cycle Glossary [5 May 2012]
Macro Revision - Key Statistics on the UK Economy [4 May 2012]
Robert Schiller - Finance and the Good Society [1 May 2012]
Macro Revision: Putting Things in Context [29 Apr 2012]
Unit 2 Macro: Britain back in Recession [29 Apr 2012]
Unit 4 Macro: The Euro Zone Crisis (Revision) [22 Apr 2012]
Unit 2 Macro: Revision on Capital Investment [30 Mar 2012]
Blanchflower calls for more action to address youth jobless crisis [28 Mar 2012]
Unit 4 Macro: Evaluating 3 Years of Quantitative Easing [27 Mar 2012]
Unit 4 Macro: Video Resources on the Euro Crisis [10 Mar 2012]
Unit 2 Macro: Policies to Drive Economic Recovery [9 Mar 2012]
Economies hooked on central bank stimulants? [4 Mar 2012]
Unit 2 Macro: Targeted Tax Cuts to help the Economy [22 Feb 2012]
Unit 4 Macro: King on the UK Economy [15 Feb 2012]
Martin Wolf on Global Shocks [10 Feb 2012]
Trucks are the new way of measuring debt [1 Feb 2012]
Unit 2 Macro: Growth and Development - Some Indicators [30 Jan 2012]
Unit 4 Macro: Money, Debt and the New World Order [22 Jan 2012]
Unit 4 Macro: France loses her AAA credit rating [15 Jan 2012]
Unit 4 Macro: Economics of Fiscal Deficit Reduction [12 Jan 2012]
Unit 4 Macro: UK Bond Yields Reach Record Lows [11 Jan 2012]
Unit 2 Macro: Factors Driving Business Investment [10 Jan 2012]
Hopes and Fears 2012 [10 Jan 2012]
2011 in Review - The US Economy [27 Dec 2011]
Unit 2 Macro: The UK Housing Market in 2011 [26 Dec 2011]
The Eurozone Crisis Explained (again!) [22 Dec 2011]
Where is the UK Economy? National Output [22 Nov 2011]
Unit 2 Macro: Should the EU introduce a Tobin Tax? [14 Nov 2011]
AS Macro: The State of British Business [13 Nov 2011]
Eurozone crisis - a selection of resources [12 Nov 2011]
Can the “invisible hand” solve Africa’s poverty? [13 Oct 2011]
Skidelsky in Madrid [12 Oct 2011]
Unit 2 Macro: UK suffers a weak recovery [12 Oct 2011]
Why Is Macroeconomics Such A Mess? [11 Oct 2011]
Unit 2 Macro: Homework Assignment on Consumer Spending [3 Oct 2011]
Greek debt decision tree [25 Sep 2011]
Unit 4 Macro: Greek Economy at Default’s Door [25 Sep 2011]
Unit 4 Macro: IMF Flags up Risks of Double Dip [20 Sep 2011]
UK Macro: Risks of a Double Dip Recession [12 Sep 2011]
Unit 4 Macro: Dangers of High Inflation [11 Jul 2011]
Unit 1 Micro: High price of petrol drains demand [9 Jul 2011]
AQA ECON4 Context [20 Jun 2011]
A2 Macro: Consumer Spending [30 May 2011]
AS Macro Key Term: Deflation [24 May 2011]
AS Macro Key Term: Economic Recovery [23 May 2011]
AS Macro Key Term: Recession [23 May 2011]
EU Economics: Comparing the UK with Europe [14 May 2011]
UK Economy Update: What Mervyn Said [11 May 2011]
AS Micro: What´s really behind the oil price rise? [10 May 2011]
Interest Rates Held at 0.5% once again [5 May 2011]
AS Macro: Extended House Price Deflation? [5 May 2011]
Macroeconomics revision - measuring Consumer Confidence [4 May 2011]
A2 Macro: Chinese investment in the EU [3 May 2011]
AS and A2 Macro Revision: Keynesian Economics [28 Apr 2011]
A2 Macro: Twin Deficits [22 Apr 2011]
Rise in investment could kick start recovery [18 Apr 2011]
Focus on Ireland’s Economy [12 Apr 2011]
A2 Macro: Back to Roubini - a Year On! [11 Apr 2011]
OCR F585 June 2011: Euro Area on the Rocks? [11 Apr 2011]
AS Micro: Prices for New and Second Hand Cars [9 Apr 2011]
AS Macro Key Term: Double-Dip Recession [8 Apr 2011]
AS Macro Key Term: Jobless Recovery [8 Apr 2011]
EU Economics - Portugal Reaches for Bail Out [6 Apr 2011]
AS Macro Key Term: Fiscal Austerity [6 Apr 2011]
AS Macro Key Term: Expansionary Monetary Policy [4 Apr 2011]
AS Macro Key Term: Bubble [4 Apr 2011]
AS Macro Key Term: Fiscal Deficit [3 Apr 2011]
OCR F585 June 2011: Data Charts (2) [30 Mar 2011]
Keeping Track of UK Macro Objectives [18 Mar 2011]
Focus on Spain [16 Mar 2011]
Focus on Japan - Human Catastrophe, Economic Risks [13 Mar 2011]
Timetric: UK Consumption as a Share of GDP [12 Mar 2011]
EU Economics: How far is the Eurozone away from being an OCA? [12 Mar 2011]
AS Macro Revision: Investment Spending [12 Mar 2011]
Dambisa Moyo - How the West was Lost [11 Mar 2011]
Ireland - Mass Unemployment and Shrinking GDP [10 Mar 2011]
EU Economics: Germany leads Euro Zone revival [25 Feb 2011]
EU Economics - Life at the jagged edge of the Euro Zone [20 Feb 2011]
Never Mind Plan B - Plan V needed for the UK Economy! [17 Feb 2011]
Challenges facing the London Economy [12 Feb 2011]
Mo Tanweer on Global Currency Wars [10 Feb 2011]
David Smith on Shifting Sands in the Global Economy [8 Feb 2011]
Choppy Times - An Economic Cycle Update and Resource Download [25 Jan 2011]
Economics Q&A: Will the rise in VAT harm the UK’s economic performance? [17 Jan 2011]
Will we have to live with high unemployment? [17 Jan 2011]
EU Economics: Is 2011 the year the euro will fall? [9 Jan 2011]
Economics Q&A: What economic factors affect the demand for new cars? [9 Jan 2011]
Economics Q&A: Will the Government spending cuts affect inflation? [3 Jan 2011]
Economics Q&A: Why might Europe’s weaker economies struggle to grow in the next few years? [2 Jan 2011]
Revision: Consequences of Unemployment [1 Jan 2011]
EU Economics: EU Economy in Charts Jan 2011 [29 Dec 2010]
EU Economics: Estonia joins the Euro [27 Dec 2010]

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