Mr. King, Governor of the Bank of England, produced a rather self serving speech on the Today programme. Like a true politician, Mr King used the opportunity to evade responsibility for the crisis, largely by pointing the finger of blame at others.
He should have spared himself the bother. The facts speak clearly and unambiguously about his role in the recent economy history of this country. During the early years of his tenure as governor, the Bank of England kept interest rates dangerously low. This lax policy stance fuelled a credit boom that financed the housing bubble. The Bank of England had an opportunity to kill the bubble in 2005. Instead of holding fast to a high interest rate policy, the Bank of England cut rates and reinvigorated house price inflation. The rest of the story you know.....
The Bank of England lost responsibility for bank supervision in 1997 when new Labour came to office. Therefore, Mr King can rightly argue that he was not responsible for the lax oversight of the financial sector. Perhaps, he could have done more to articulate his concerns about the unsustainable growth of credit. Nevertheless, he is not top of the list of guilty men who facilitated the catastrophic failure of banks like RBS, Northern Rock, and Lloyds.
On inflation, he carries a heavy responsibility. Since 2006, the Bank of England has missed its inflation target more or less consistently. Since the crisis began, the UK suffered from the highest inflation rate of any advanced economy. This is a direct result of policy mistakes such as reducing interest rates to absurdly low levels, as well as the disastrous decision to introduce quantitative easing.
His responsibility for the appalling fiscal policies of the last five years is more indirect. Without quantitative easing the government could not have run up such large deficits. Mr King was an enabler.
Economic historians will judge Mr King very harshly. Under his watch, the country ran up the largest asset bubble in its history. This inevitably led to the worst financial crisis in 100 years. The policy response was ill judged, often exacerbating rather than mitigating the effects of the crisis. GDP fell sharply and the recovery never materialised. It is a grim record, highlighting consistently poor judgement and bad decision-making.
His retirement cannot come a moment too soon.