Monday, 21 April 2008
Mervyn King is erudite and articulate and sometimes quite funny. But it still seems to me that he is getting an extrordinarily soft ride from the media for his handling of the credit crunch (probably because everyone is too busy beating up Gordon Brown). He spent most of the autumn lecturing evryone about moral hazard, suggesting that he wouldn't bail out the banks. Central banks, he said in September, should only act when there are "economic costs on a scale sufficient to ignore the moral hazard in the future." And yet in reponse to house price falls of, at most, 1% or 2% he's decided to start swapping gilts for mortgages. Whether its a good or bad idea, its certainly not consistant with what he was telling the markets a few months ago. So why should anyone believe the bank again?