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A King's 60th Birthday
by Tony Butcher
2008-03-30 09:21:39
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30th March: 90th day of the year, end of the first quarter, British Summer Time begins and it is the end of the financial year. It's the perfect time to celebrate an Economist's birthday.

As Mervyn King blows out the candles on his 60th birthday cake today he'll have a few moments to reflect on his life and how he has a powerful hand in deciding the direction of the British and Global Economy. As the Governor of the Bank of England he is the Chairman of the Monetary Policy Committee (MPC) whose job is to secure inflation expectation within the United Kingdom by adjusting interest rates on a monthly basis.

Since the MPC was created by the Blair/Brown Labour Government in 1997, Mervyn has been the only regular fixture, quite an achievement when, at the time, the only SPAM was tinned meat, Michael Owen hadn't played for England and September 11th was only known for being the 254th day of the year. 11 years on and we are in the midst of a global credit meltdown which has so far claimed a large financial institution on each side of the Atlantic: Can King rule the markets a little longer?

A keen Worcestershire cricket fan, Mervyn has played a steady innings so far. His first half century saw him build on a Cambridge and Harvard education before crossing the boundary rope to teach Economics at Universities, eventually becoming Professor of Economics at the London School of Economics. As he saluted the crowd on making his 50 he started his role as Deputy Governor at the Bank when he started facing some bad weather and tricky deliveries. This led the MPC to halve base rates to 3.5% over six years.

However, more recently, the global credit turmoil and the scenes of people queuing to take their savings out of the failing Northern Rock has left the Chairman playing some defensive strokes. Aggressive liquidity and policy action by the Federal Reserve in the US has led some commentators to question if the MPC are doing enough to head-off a significant downturn in the UK economy. So far the Bank have reduced interest rates by 50 basis points and joined the other major central banks in coordinated liquidity provision, but it is not having the anticipated effect.

Liquidity problems are persisting and home owners, whose attractive fixed-rate mortgage deals are running out soon, are getting a sharp wake up call on how expensive borrowing has become. We are only half-way through this innings and we need Mr. King to hold his nerve and keep playing with a straight bat. He famously said his ambition was to make monetary policy 'boring' (something many already assume), he strives for the predictability which will give the financial markets the platform to increase confidence.

Enjoy your tea and cake Mervyn, because tomorrow you'll have to put the pads and helmet back on and face another onslaught from those financial markets.

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Clint2008-03-30 16:41:14
Like England Captain Michael Vaughan so far a safe pair of hands but with an uncertain future if he has to face some more 'Googlies' like Northern Rock!

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