Bank of England Deputy Governor Sees Risk of Decade-Long Depression

Discussion in 'Wall St. News' started by ByLoSellHi, Feb 20, 2009.


    BOE’s Gieve Sees Risk of Decade-Long Depression Like Japan
    Email | Print | A A A

    By Jennifer Ryan and Brian Swint

    Feb. 20 (Bloomberg) --
    Bank of England Deputy Governor John Gieve said policy makers are fighting to protect Britain from the threat of a decade-long depression similar to that suffered by Japan in the 1990s.

    “That is a risk,” he said late yesterday during questions after a speech at the London School of Economics. “It’s a serious risk but we are addressing it. There’s a huge amount of policy easing in the pipeline. I don’t think it’s inevitable.”

    The Bank of England this month cut the benchmark interest rate to 1 percent, the lowest ever, and sought permission from the government to buy securities to create money. Japanese policy makers hesitated in addressing a banking crisis in the 1990s and then struggled to revive economic growth and fight deflation in what is known as the “Lost Decade.”

    Gieve said that the Bank of England will probably start so- called quantitative easing in the next few weeks. Policy makers are currently debating what the “effective” zero rate is after limiting this month’s reduction on concerns about banks’ willingness to lend at low rates of interest, he said.

    The Bank of England began buying commercial paper a week ago when its asset purchase facility became operational using money allocated by the Treasury. It will release data today showing the value of transactions conducted so far.

    “We don’t know how deep and prolonged this recession will be or how soon and how completely financial markets will recover,” he said in his prepared remarks. “So it is too early to reach settled conclusions on causes or cures.”

    Last Speech

    The speech was Gieve’s last as a policy maker at the U.K. central bank. He will leave his post at the end of the month after serving on the interest-rate setting Monetary Policy Committee since January 2006.

    Gieve will take up a position at the Kennedy School of Government at Harvard University, LSE Director Howard Davies said. On the MPC, he will be replaced by Paul Fisher, who was previously the bank’s executive director of foreign exchange.

    There are several lessons to be learned from the financial crisis, Gieve said. Targeting inflation may not be enough for policy makers to steer the economy.

    “If inflation targeting by an independent central bank is an essential foundation of policy, it is pretty clearly not sufficient on its own,” he said. “Having a large arsenal of policy instruments, which vary in their point of influence, provides some welcome flexibility.”

    ‘Cautious Skepticism’

    Policy makers must “be willing to back their judgments, whether in identifying asset bubbles or identifying firms or markets which threaten financial stability, and to take preemptive action,” Gieve said. “Our default position should be one of cautious skepticism.”

    Gieve said that authorities need the power to enforce “dynamic provisioning” for financial institutions to reduce the tendency of some accounting rules to inflate a boom and exacerbate a bust in the economic cycle. Authorities could also introduce restraints on lending terms, he said.

    For now, the economy may slump further. Data on U.K. retail sales and mortgage repossessions will be released today. The next interest-rate decision is March 5.

    To contact the reporters on this story: Jennifer Ryan in London at; Brian Swint in London at
    Last Updated: February 19, 2009 19:01 EST
  2. Every time some slime ball who probably works on wall street or at some lame Edward Jones office (the new E.F. Hutton) sees one of my factual threads, preaching the gospel, and warning people how bad things are getting - with supporting evidence - they can't help but rate the thread one star.

    It's so much fun to get under their slime ball skin. :cool:
  3. <object width="425" height="344"><param name="movie" value=""></param><param name="allowFullScreen" value="true"></param><param name="allowscriptaccess" value="always"></param><embed src="" type="application/x-shockwave-flash" allowscriptaccess="always" allowfullscreen="true" width="425" height="344"></embed></object>
  4. well, we know the UK is soon to be bankrupt, with no manufacturing base and a bloated financial/housing sector.

    there is nothing that can be done, this over-inflated economy is just deflating.

    No amount of quantitative easing will do the trick.

    Gone are the days of cool britannia, here comes dark britannia
  5. With global warming, a 10 year depression and their foreigner "offshore" taxation system the UK might actually become a cheap and sunny place to retire in a couple years :cool:
  6. Synonym


    Even before the crunch started, manufacturing acccounted for a larger proportion of UK GDP than Financial Services.
  7. /'*ztrew123456