David Hale, the US economist, told Australian TV last night that Mervyn King believes the coming fiscal austerity will keep the next government out of power for a generation.
“I saw the governor of the Bank of England last week when I was in London and he told me whoever wins this election will be out of power for a whole generation because of how tough the fiscal austerity will have to be.
And now we have the problem that it may not even be a majority government, it may have to be some kind of coalition government or some kind of informal coalition where one party agrees to support the other party, at least in producing a budget, and none of that will be good for financial confidence. I’d be very bearish right now on both the British pound and on the British Government bond market.”
Since Mr Hale thinks it is OK to speak freely about a private conversation, for the interests of clarity, I will do the same.
Mr Hale did not meet the governor of the Bank of England last week as he has claimed. In fact he met him in early March, long before the election campaign and long before the Budget on March 24. At a private breakfast meeting on March 12, Mr Hale reported a similar, but not identical, account of his conversation with the governor. I was present. His remarks about Mr King struck me at the time as exaggerated. Read more