At IMF, Former Bank of England Governor Mervyn King Warns of ‘Financial Armageddon’

Oct. 22, 2019 (EIRNS)—While the current Governor of the Bank of England Mark Carney is on his Green finance high horse, his predecessor Mervyn King is warning that the world economy is sleepwalking into a new financial crisis. Although King says the crisis will not start in the U.S. banking system, he argues the U.S. Federal Reserve must be given the “firepower” to save the financial system. In a lecture in Washington at Oct. 19 Per Jacobsson Lecture during the International Monetary Fund annual meeting, King said: “Another economic and financial crisis would be devastating to the legitimacy of a democratic market system. By sticking to the new orthodoxy of monetary policy and pretending that we have made the banking system safe, we are sleepwalking towards that crisis.”

According to the Guardian King warned that the U.S. faces a “financial Armageddon” if the U.S. Federal Reserve is not given back the full and “necessary firepower” to deal with a new crisis. He further said that there has been no “questioning of the basic ideas underpinning economic policy. That needs to change.”

He wrongly claims that “the world as a whole is suffering from demand-led secular stagnation.”

He went on: “It is the failure to face up to the need for action on many policy fronts that has led to the demand stagnation of the past decade. And without action ... there is a risk of another financial crisis, emanating this time not from the U.S. banking system but from weak financial systems elsewhere.”

King called on the Fed and other central banks to begin talks “behind closed doors,” saying “Congress would be confronted with a choice between financial Armageddon and a suspension of some of the rules that were introduced after the last crisis to limit the ability of the Fed to lend.”

He said nothing on climate change, nor on a fight for the real solution, a Glass-Steagall-type bank separation.