Mervyn King says the Bank’s Monetary Policy Committee has been plagued by “group-think”
Mervyn King having run the Bank of England from 2003 to 2013, says the Bank’s Monetary Policy Committee has more recently been plagued by “group-think”
“It is troubling,” he told fellow peers. “There were no dissenting voices to challenge the view inflation was transitory.”
A “lack of intellectual diversity” on the MPC, he argued, led to a failure to challenge consensus.
So UK interest rates were kept ultra-low – allowing inflationary expectations to build further. And by the time the MPC did finally start raising rates, in December 2021, annual inflation was already dangerously high at 5.4pc – approaching three times the official target.
after 2009, when the Bank started its QE money-printing programme in the wake of the global financial crisis, the Treasury-dominated appointments procedure has effectively blocked any monetarist economists from the MPC.
That’s because monetarists have been warning for a long time that QE would ultimately cause inflation.
During 2020 and 2021, as inflationary dangers grew, there was “no mention of the monetary data in the Bank’s reports”, King told the Lords.
“The excessive reliance on models that ignored money altogether was somewhat foolish,” he added.
Banks create money when they lend. They also create money when they buy coffee machines
Frances Coppola 3 September 2021
https://englundmacro.blogspot.com/2021/09/banks-create-money-when-they-lend-they.html
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