The truth about Mervyn King

A new political cult forms.

"Who would have guessed in late 2007 or early 2008 that an answer to the banking crisis would be to hand more power to Mervyn King?" asks the Guardian's Nils Pratley. King has long been admired in Tory circles and so George Osborne's decision to give the Bank of England the linchpin role in regulating the UK's financial sector came as no real surprise.

I'm no fan of Merv. I think he long ago politicised and abused his position. Remember his public objection to the Labour government's fiscal stimulus? Remember his public approval for the coalition's deficit reduction plan?

He also has rather poor judgement. My colleague Professor David Blanchflower, a former external member of the Bank of England's Monetary Policy Committee and one of the few economists to see the crash coming, outlined King's failures in a devastating piece for the NS in September 2009 ("The story from the inside").

Blanchflower wrote:

So why did the committee get it so wrong? From my perspective, it was hobbled by "group think" -- or the "tyranny of the consensus". Governor Mervyn King, the old iron fist of the Bank of England, with his hawkish views on rates, dominated the MPC. Short shrift was given to alternative, dovish views such as mine. I focused on the empirical data suggesting Britain was heading for recession; Mervyn and the rest of the committee focused on their theoretical models and the (invisible) threat of inflation. In fact, the Bank of England may more suitably be called "the Bank of Economic Theory". Unfortunately, the economic theories failed just when we needed them most.

He added:

Clever as Mervyn King may be, he missed the crash and the subsequent recession, and hence, so did the consensual MPC on which I sat. In August 2008, the MPC's quarterly Inflation Report did not even contain the word "recession"; it saw the economy standing still over the next year. I very nearly quit the committee at that point. In an interview that month with Reuters, I called the forecast "wishful thinking". Mervyn called me into his office to admonish me for that one.

Blanchflower also criticised King's obsession with so-called moral hazard:

We were not told what was happening to British banks such as Northern Rock, Royal Bank of Scotland, Lloyds, Bradford & Bingley or Alliance & Leicester. Or to US banks such as Lehman Brothers or Bear Stearns. We weren't kept in the loop, but we should have been. With hindsight, Mervyn King's focus on moral hazard -- the idea that banks are encouraged to take more risks because they know they will be bailed out -- was a huge mistake.

He reminds us of King's unforgivable failure to foresee the explosion in unemployment:

In the summer of 2008, I warned the Commons Treasury select committee that "something horrible" was going to happen. I was becoming even more worried about recession, and in September I voted alone, as ever, for a cut of 50 basis points (bps) -- or 0.5 per cent -- to the Bank's base rate. At my September appearance before the select committee, King, who was sitting two seats from me at the time, was asked by the MP Andy Love: "On unemployment there have been some suggestions, and Mr Blanchflower has said -- and I think there are quite a lot of people out there who would agree with them -- that it may go up faster than the projections in the Inflation Report. Is that a worry to you?"King replied: "At least the Almighty has not vouchsafed to me the path of unemployment data over the next year. He may have done to Danny, but he has not done to me." To say the least, I was rather surprised.

Hail the King? I'd rather not.

Mehdi Hasan is a contributing writer for the New Statesman and the co-author of Ed: The Milibands and the Making of a Labour Leader. He was the New Statesman's senior editor (politics) from 2009-12.

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Will anyone sing for the Brexiters?

The five acts booked to perform at pro-Brexit music festival Bpop Live are down to one.

Do Brexiters like music too? If the lineup of Bpoplive (or more accurately: “Brexit Live presents: Bpop Live”) is anything to go by, the answer is no. Ok, former lineup.

The anti-Europe rally-cum-music festival has already been postponed once, after the drum and bass duo Sigma cancelled saying they “weren’t told Bpoplive was a political event”.

But then earlier this week the party was back on, set for Sunday 19 June, 4 days before the referendum, and a week before Glastonbury, saving music lovers a difficult dilemma. The new lineup had just 5 acts: the 90s boybands East17 and 5ive, Alesha Dixon of Britain’s Got Talent and Strictly Come Dancing fame, family act Sister Sledge and Gwen Dickey of Rose Royce.

Unfortunately for those who have already shelled out £23 for a ticket, that 5 is now down to 1. First to pull out were 5ive, who told the Mirror that “as a band [they] have no political allegiances or opinions for either side.” Instead, they said, their “allegiance is first and foremost to their fans”. All 4our of them.

Next to drop was Alesha Dixon, whose spokesperson said that that she decided to withdraw when it became clear that the event was to be “more of a political rally with entertainment included” than “a multi-artist pop concert in a fantastic venue in the heart of the UK”. Some reports suggested she was wary of sharing a platform with Nigel Farage, though she has no qualms about sitting behind a big desk with Simon Cowell

A spokesperson for Sister Sledge then told Political Scrapbook that they had left the Brexit family too, swiftly followed by East 17 who decided not to stay another day.

So, it’s down to Gwen Dickey.

Dickey seems as yet disinclined to exit the Brexit stage, telling the Mirror: "I am not allowed to get into political matters in this lovely country and vote. It is not allowed as a American citizen living here. I have enough going on in my head and heart regarding matters in my own country at this time. Who will be the next President of the USA is of greater concern to me and for you?"

With the event in flux, it doesn’t look like the tickets are selling quickly.

In February, as David Cameron’s EU renegotiation floundered, the Daily Mail ran a front-page editorial asking “Who will speak for England?” Watch out for tomorrow’s update: “Who will sing for the Brexiters?”

I'm a mole, innit.