Former Governor of the Bank of England Mervyn King says the central bank hasn’t been covering itself in glory of late, and that’s partly thanks to it falling victim to groupthink. The economics profession is jammed with brilliant people, he argues on this week’s episode of Merryn Talks Money, but unfortunately, they’ve all been taught the same thing: money has absolutely nothing to do with inflation.

Believing that was a “big mistake,” King says it’s brought the UK economy to where it is: inflation at multi-decade highs and the BOE having its credibility questioned. 

According to King, it’s likely that—despite all money supply indicators signaling the consumer price index will soon be falling fast—the BOE will keep raising rates and the UK will end up in a recession. The central bank will have made the misstep “in both directions over a period of three to four years.” He points out that whether rates go up or down a little over the next year won’t change the fact that they are likely to remain far above the historical lows to which people are accustomed. And that suggests all asset prices are going to have to come down relative to income.

Former Governor of the Bank of England Mervyn King says the central bank hasn’t been covering itself in glory of late, and that’s partly thanks to it falling victim to groupthink. The economics profession is jammed with brilliant people, he argues on this week’s episode of Merryn Talks Money, but unfortunately, they’ve all been taught the same thing: money has absolutely nothing to do with inflation. Believing that was a “big mistake,” King says it’s brought the UK economy to where it is: inflation at multi-decade highs and the BOE having its credibility questioned. 
According to King, it’s likely that—despite all money supply indicators signaling the consumer price index will soon be falling fast—the BOE will keep raising rates and the UK will end up in a recession. The central bank will have made the misstep “in both directions over a period of three to four years.” He points out that whether rates go up or down a little over the next year won’t change the fact that they are likely to remain far above the historical lows to which people are accustomed. And that suggests all asset prices are going to have to come down relative to income.

Merryn Talks Money with Bloomberg senior columnist Merryn Somerset Webb is your key to understanding how markets work – and how you can make them work for you. Every episode features a relaxed but in-depth conversation with a fund manager, a strategist, a Bloomberg expert or just someone Merryn finds particularly interesting in any given week. Listen in for the kind of insights and explanations everyone can use to help them make better saving and investing choices.

Merryn Talks Money with Bloomberg senior columnist Merryn Somerset Webb is your key to understanding how markets work – and how you can make them work for you. Every episode features a relaxed but in-depth conversation with a fund manager, a strategist, a Bloomberg expert or just someone Merryn finds particularly interesting in any given week. Listen in for the kind of insights and explanations everyone can use to help them make better saving and investing choices.

Merryn Talks Money

Mervyn King Says the Bank of England Is Making a ‘Big Mistake’

https://api.omny.fm/orgs/e73c998e-6e60-432f-8610-ae210140c5b1/clips/4487de6a-236c-4d8e-bbc2-b04400e4a25e/transcript

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