Mervfyn King Guilty

[james armstrong]

Mervyn King Governor of B of E gave a lecture on Radio 4   Wed  2
May.

 

He was asked two questions on housing crisis.

 

Did he regret the  Bank’s decision to manipulate housing as a
financial  tool to  stimulate  the economy/

 

Would he support instead of Q E , a massive building
programme of 200,000 social  houses?

 

The first he denied saying that housing  (in UK) did not cause the crisis,  He quoted the Irish experience that there was
a massive crisis when the boom in housebuilding collapsed leaving jobs lost and
houses empty and a banking crisis in  Ireland .and this had not happened here.  

But this was   denying
the truth. The Irish experience is not 
relevant to  the UK
situation where there was exactly the opposite 
housing supply situation to UK - here house supply falling yearly 
and causing an increased shortage  and
higher prices. 

If Ireland's 
case was irrelevant why did he quote it?

King is exposed , guilty as charged – causing the crisis
by  manipulating house prices 

 Manipulation house
prices was the name of a paper quoted by Kate Barker to the B of E  MPC
committee:    the policy was for B of E and
Treasury  to sanction/cause rising house
prices , and consequent larger mortgages , as a stimulus  to debt and therefore to growth in the
economy.  Houses - actuallu houseprice
rises  caused out of control  mortgage lending which did indeed cause  the crisis, It was Northern Rock’s mortgages
and   speculating on sub prime mortgages
which  was at the heart of the crisis.  King is not truthful and therefore his
analysis and his proposed cures are 
invalid.

 

King  avoided the second
question by saying it was political and raising a laugh.saying     he
avoided politics.  ‘Social’  houses  are
political but  stimulating the economy by
building badly needed houses and  creating
jobs and  circulating money  is classic and sound economic theory a la
Keyenes  (if unorthodox )

King knows this  but
cannot admit that his policy of welcoming  house shortages  caused the crisis  he and HM treasury are guilty as charged.

 

Mervyn King stands 
condemned in my book and his prescription to fend off another banking  crisis are doomed unless he acknowledges that the
house price boom sanctioned by B of E , HM Treasury  and Government policy was  the prime cause of  the crisis. .

In the real world , house prices  are out of reach, social  houses are not built in sufficient numbers
and  the 
market is destroyed by monopolist landbanking  plc house-builders .

 

 

King is dishonest . His cures will not avoid future crises  In fact the next house price boom is
already  under way as supply has fallen
to an all time low. and prices have everfallen to any pre boom  level.  

The next  crisis will
be bigger ,  and soon.

James     

 		 	   		  
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