King’s gambit

No one who knows Sir Mervyn King would describe him as a radical. The Bank of England governor looks every inch the owlish academic, yet he is midway through what is possibly the greatest gamble in Britain’s economic history. Under the frosted-glass term of ‘quantitative easing’, he may soon have the Bank artificially create £600 billion of credit to its own account, the bulk of which would be used to buy government debt. Other countries have attempted quantitative easing, but never on this scale. Sir Mervyn is boldly going where no central banker has gone before — yet with the minimum of debate over the policy’s costs, its consequences and its victims.

The problem is clear enough. Britain seems to be stalled in a Zero Era with flat consumer spending, next to no pay rises, a slump in investment, no-growth economy — and ultra-low interest rates. And this is no coincidence.