One of the most vocal and the most transparent members of the MPC since its inception, he is quite an act to follow. He is seen as an arch-dove, but that is more due to circumstances than inclination in my view.

I will go into the details in a bit, but the bottom line of both was that the first decade of the monetary policy committee was a huge change that had brought economic stability to Britain. Moreover, the improved economic performance could not be luck because the UK’s performance had improved materially compared with the rest of the Group of Seven leading economies.

This post updates the evidence given by the BoE governor. Everyone knows Britain’s economic performance has deteriorated since 2007. It has also slipped badly relative to the rest of the G7. On the basis of Sir Mervyn’s 2007 logic, the deterioration must be a sign BoE independence has performed poorly and it cannot just be misfortune. Alternatively, I would argue that the 2007 lecture can represent a tutorial in hubris, the measures used were far from ideal and pride, did indeed come before a fall.

It will be interesting to see whether Sir Mervyn agrees in his BBC lecture tonight.

1. Is this a deep recession?

No. It is nothing like 2008-09 when output dropped 7 per cent over five quarters. In truth, as Joe Grice, chief economist of the Office for National Statistics said, the economy has been broadly flat since the third quarter of 2010. Some quarters up a bit, the others down. The level of output is now measured at an index number of 98.1 (2008=100) and it was 98.3 in the autumn of 2010.

Mervyn King, Governor of the Bank of England

There is still more than 14 months to go before Sir Mervyn King leaves the Bank of England, but he is already in danger of appearing a lame duck as the race to succeed begins in earnest.

Today the FT reported that Mark Carney, the governor of the Bank of Canada, has been approached in relation to the job by a member of the Bank’s court, its governing body, having spoken to three people involved in the process. Mr Carney declined to comment. The Bank of Canada said the report was not accurate.

The FT also reported that the Treasury wants Charlie Bean, deputy governor for monetary policy, to remain in post after his term expires in June 2013 to provide some continuity as the top echelons of the Bank are rearranged. No one has denied this part of the story and Mr Bean has told colleagues he is willing to accept any offer to stay on for an interim period. So where do these events put the runners, the riders and those subtly touting themselves for the job.

This is a post about the lack of understanding in the UK government that the private sector – whether it is a pension fund, a sovereign wealth fund or wealthy individuals – do not simply give the nation assets.

The speech blames the lack of powers available to the BoE for officials’ inability to control the crisis, but reassures us that the new FPC is now seeing its recommendations implemented.

The logic of the speech is that the BoE’s voice could not work before the crisis so the BoE cannot be blamed. Yet voice is succeeding now, so the BoE must get the credit.

What is remarkable is that Mr Fischer seems to forget that the powers available to the BoE now are precisely the same as those available to the BoE in the crisis. New powers will come only when legislation is passed and certainly not until 2013.

Read the speech to feel the full righteousness of the BoE official line.  Or you can read the best quotes below.

The public appeared to accept that interest rate rises hit borrowers and benefited savers and vice versa. The vast majority of the commentary related to the analysis of whether any monetary policy change was warranted by the prospects for inflation. This, in Britain at least, was the way the Bank of England liked it.

Unelected officials feel very uncomfortable about being seen to favour one group of society over another. Redistribution, after all, is properly something for elected politicians, since it involves using the power of the state to take money from some to give it to others.

It is noteworthy, therefore, both that the distributional effects of quantitative easing are now being raised vocally by strong lobby groups and that the Bank is feeling peeved, rightly so. 

The value of his speech did not arise from his bolted-on views that he does not think “there is likely to be a further case [for more QE] once our current programme is complete”.

Rather it came from taking a really big issue — the likely path of consumption — and analysing it in a way that brought insights from different sorts of households to the aggregate.

But in such an interesting talk, what on earth was he doing referring repeatedly to economic forecasts from the Office for Budget Responsibility? He has no influence over the OBR forecasts, but is important (one of nine) in agreeing the Bank forecasts.

It was akin to Moody’s downgrading UK sovereign debt on the basis of reading a report from S&P. 

The reason for my prediction isn’t as simple as the fact that central banks are assiduous followers of fashion, even though they are. But that the more forward-thinking officials in the Bank believe in increasing transparency and have a rather less cynical view of the British public and media than the current governor, Sir Mervyn King.

As Robin pointed out in his post on Tuesday, the Bank of England’s current forecasts have some advantages. By forecasting growth and inflation on the basis of two assumptions for monetary policy (constant policy and market expectations of interest rates), the growth and inflation forecasts are consistent with the assumptions for monetary policy. If inflation is forecast to be lower than target at a two to three year policy horizon, the implication is clearly that monetary policy is likely to loosen and vice-versa.