Mervyn King

Made in the UK
The UK economy, how's it doing? Well Mervyn King is not exactly confident is he? There's less talk of domestic matters now since the revolutions in North Africa. These events are pushing oil prices to painful levels and it is this price rise that will cause all sorts of trouble. A recent post on EU Referendum suggests the older age group is to see a rise in debt problems. This age group tends to own a house so could be thought of as having great potential wealth. At the other end of the age range students will find university fees rise to the maximum permissible, so their debt burden will also. This means their grasp on the housing market further weakens unless house prices fall. This may well happen and for more on students debt problems see HERE.

The always fragile Buy-to-Let market sector could well be heading for trouble again, see HERE.

An important speech?
Mervyn King, the Governor of the Bank of England, has made a speech, stating that living standards will fall at an alarming rate. He has mentioned the 1920s, suggesting a return to the great recession. Can this be so and what can the average person do about it? Prior to the great property price collapse that led to the financial troubles that are still with us, the general rule seemed to be 'spend, spend, spend'. It was if the very health of the nation, your relatives and friends depended upon prolonged and focused consumerism; is this still true? But then this avoids another question, was it the right policy in the first place? Before the property bubble burst a former Deputy Governor of the bank of England, Sir John Gieve, had said that personal debt was far too high. It would be remarkable if this situation has changed.

For many people not only is immediate personal debt a problem but they are concerned about their younger relatives' chances of paying off the National Debt. The Private Finance Initiative (PFI) scheme is a typical disaster here, yet almost as soon as it was begun the drawbacks were clear. Unemployment is rising and people are fearful of the future so attitudes will change, they will scale back their plans.

A perfect pair
This is the time of year traditionally known as the silly season and it's hard going for people who can't relax and have no sense of humour. I like this time of year, it's a test and passing with flying colours is Edmund Conway. He brings us, in the Telegraph, but with no online version, one of the funniest stories in a while. It has an inauspicious start in that its central character is Mervyn King. But stay with me for that man is more than just an authority on moral hazard. Conway says that King likes to tell of the moment he realised that what he calls the, Great Recession, will be harder to get out of than you might think. King was at a posh conference on the world circuit with the great and the good, the politicians who lead us, and was both amused and horrified to hear them all declare they would get out of the mess by exporting. Clearly for this to work buyers and sellers must come in pairs. But at the conference in question all the world leaders were sellers. King gives the impression that only he spotted the problem, at the conference maybe.

However, the man atop the Clapham omnibus has known this for years.

More hot air than in a TV debate
"Is it all over?", asked a friend from overseas. I stated to explain, the date of the election and so on, but was cut short, the enquiry was about the crisis in Greece. Could the euro now said to be "saved", was the single currency and so by implication the EU, going to make it? So it's back to this post and its theme. At the time that post was written it did seem that the UK general election would come before any decision on the Greek problem. Indeed, all of the party leaders might have preferred it that way. For now, with just days to go before polling day, a decison has been reached to help Greece. However, while the EU and IMF may have made decision, that's not the same thing as a solution to the problem. There will have to be massive cuts in the costs of the Greek state. Obviously this will not be popular with the Greeks and to seek a perspective on this, comparisons will be made with other countries. And naturally, (ha, ha!) the problems of Greece and the UK are not at all similar, are they? So, rather like the Greeks spent years pretending they could go on as before, so can we; boom and bust are behind us, a thing of the past right?

Mervyn King
What is now more correctly called the financial crisis started out as the credit crisis. But back in the mid part of 2007 we were all feeling our way. As per usual it was the politicians who rose to the occasion first in so far as they saw an opportunity, not least Gordon Brown and his spinners. The crisis was seen as a chance for Brown to show himself to the voters at his best. That did not work out as planned the Brown 'bounce' came and went. Never mind Brown had blazed a trail for others to follow. Sir John McFall, yes another Scot, and the Chairman of the Treasury Select Committee was not shy to follow his Leader.

McFall seems genuine enough, at first, but it soon becomes clear he is also enjoying himself; a man with a mission. This could be dangerous. McFall left school very young, you could in those days; there was no attempt to keep people in school so as to fiddle the unemployment statistics. He also left without any qualifications. Then he 'got going' and, full credit to himself, obtained a Bachelor's degree and then an Open University MBA. So he lifted himself out of obscurity and onto something better. There are suggestions that this is harder to do these days; perhaps a Parliamentary Committee should look into this?