Bank of England governor Sir Mervyn King appears “not so much to be talking us into recession as bawling it through a megaphone”, says Ross Clark in the Daily Express. Yes, the economy has “hit another sticky patch, Greece is almost certain to default and the euro is probably doomed”, but fear is “the real contagion”. Telling people that the current crisis is the worst since the Great Depression, “if not ever”, will just scare them into stopping spending.
Such talk is unhelpful, agrees Alex Brummer in the Daily Mail. If the Bank’s objective in pressing ahead with a further £75bn of quantitative easing (QE) is to “keep the financial system liquid and improve lending conditions, companies will be discouraged from borrowing and lending if they believe that conditions are becoming worse”. And “it is possible, if one looks hard enough, to see the glass as half full”. The forward-looking purchasing managers index “actually rose in September”; re-mortgaging is keeping the housing market “bubbling along” and the National Institute of Economic and Social Research’s monthly monitor shows output grew by 0.4% in the three months to September. “It is a terribly slow upturn… but it is a recovery.”
Nor are Sir Mervyn’s comparisons with the 1930s accurate, says David Randall in The Independent on Sunday. During the 1930s, world trade fell by more than 50%; at present, it continues to grow. Similarly, unemployment is about 9% now, but was 25% in 1933. There are other differences, adds Hamish McRae in The Independent. This is a period of global inflation, not deflation. Most importantly, “the hatreds which existed then”, in the aftermath of the Great War, do not exist today.
Perhaps the Bank is “privy to data that makes it believe that further collapse in the British banking sector is now inevitable”, says Andrew Lilico in The Daily Telegraph. QE isn’t being introduced for British domestic reasons (inflation stands at around 5% a year), but because “we face the fallout from a banking sector meltdown and multiple sovereign defaults in the eurozone”. If that hurts British banks, “we might soon face a collapse in the money stock even greater that the one we faced in 2009”. The chancellor, George Osborne, “has announced credit easing, implying that he thinks the banking sector might be about to collapse, meaning alternative lending routes would be useful… we shall find out soon whether” he is right.