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Just Because You Say It Does Not Make It True

12th November 2008 | back to article listings BACK    print this article PRINT

Mervyn King must think we are all wet behind the ears saying today that everything changed when Lehman brothers collapsed in September and that now it is time to take action on interest rates. Thinking that we will believe he is being decisive now that 'the facts have changed' is all very Keynesian but we are not fooled. As the great man (Keynes) said 'When the facts change, I change my mind - what do you do, sir?'.

All very well and good but it rather misses the point. The facts changed a whole year ago, not just in September when Lehman Bros was allowed to collapse by the US government. The signs of the economy slowing and the obvious effects of the potential leakage of the credit crunch into the real economy means that the facts changed an awful long time ago, not a month or so ago. Attempting to put a smokescreen over this and say things only changed recently is to hide the fact that the Bank of England could not bring itself to act a long time ago, whether through vanity, concern over its reputation or some other retrospective excuse.

I know I've been very tough on Mervyn over the last 12 months and particularly recently and some of you are wondering why I've not been as tough on the Government. Some people are elected for their skill, experience and judgement and have a duty to apply it - that is why I feel the country has been let down by the Bank of England as I cannot believe they didn't see this coming, they just failed to act for reasons currently best known to themselves.

The Government, however, is just a group of politicians and they had no idea what they were looking at when the credit cruch hit last year - they, and their rhetoric, will be gone soon enough and they will be replaced by another tribe. We never expected much of the Government, they have delivered less than we expected and there is therefore not much further to say.

Other than, of course, Gordon Brown having contributed to the problem by thinking that he had eliminated the boom to bust cycle - which clearly he had not. Far from being the prudent Chancellor that he wanted to be known as, he made no preparation or savings for the bad times and indeed didn't really see the bad times coming or understand the wider effects of the credit crunch until it was too late. We are all paying for that now.

This news story has come from the property investment blog by Stuart Law, CEO Assetz plc.

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