‘SINCE we last met, the mood in markets has taken a sharp turn for the worse,’ Bank of England Governor Mervyn King admitted yesterday, as he opened his presentation of the BoE’s latest quarterly inflation report.
In his message of doom for British capitalism, King announced that the BoE has cut its UK growth forecast for 2011 from 1.8% to about 1.5% and warned that ‘headwinds are growing stronger by the day’.
Europe’s debt crisis and fears of contraction in the US overshadow the world economy, King warned, adding: ‘The outlook for growth in the world economy has deteriorated.’
He continued: ‘The greatest risks to the prospects for global demand come from the euro area and the substantial challenges faced by several member countries as they seek to ensure the sustainability of their fiscal positions and preserve the stability of their banking systems.’
He warned: ‘Were they to crystallize, the risks emanating from the euro area have the potential to have a significant impact on the UK economy.’
King’s lame proposal to solve the capitalist system’s debt crises failed to convince even as he spoke.
He said: ‘One way or another, the losses that were built up in recent years will have to be shared between creditors and debtors; in the world economy between creditors in the East and debtors in the West, and within the Euro-area between creditors in the North and debtors in the South.’
He claimed: ‘The big risks facing the UK economy come from the rest of the world,’ and went on to admit fiscal impotence, saying: ‘But there is a limit to what UK monetary policy can do when large real adjustments are required. And it cannot influence inflation over the next few months.’
King declined to comment on whether the Bank was considering ‘quantitative easing’ to pump paper money into the economy.
The Bank’s report was compiled before the latest meltdown on financial markets and yesterday, after an initial advance, the FTSE 100 resumed its decline, falling more than 3%, with some £30 billion wiped off share prices, and the index falling below 5,000 points.