Mervyn King and the Zzzero Sum Game

Mervyn King gave the Oxford University Romanes Lecture last night.

You probably didn’t know that even if you lived in Oxford, and even if you were slightly econ-obsessed. The Oxford University economics department holds free public lectures, but they won’t lower themselves to having a mailing list. Like much that was illustrated in King’s talk, exclusivity and tradition far outweigh usefulness.

The Vice Chancellor’s flattery before and after the forty-five minute talk would lead you to believe that King had said something.

King is not a gifted speaker. If you managed to stay awake for the jokes anecdotes non-economics bits, you could enjoy the fact that, while the audience laughed, he stopped talking for a moment.

His content was no more than anyone with an interest in economics could have gained from occasional reading of the popular press.

His throughline was basically this:

There is a disequilibrium in the international economy caused by national debt in the western economies. This disequilibrium leading to slump in demand could not be corrected by domestic policy. Monetary policy and even quantitative easing has not fixed it. Some governments are trying to fix their trade deficit by devaluing their currency, but this is of course a zero sum game. But don’t worry because the fall in productivity is just a blip and everything will get better once the trade surpluses and debt levels pan out.

He fleeting claimed that there had been monetary and fiscal stimulus to correct the post crash slump. More detail on the latter please Mervyn!

King’s talk was fruitless. No plan was outlined, no addressing of why monetary policy had failed, no speculation as to where the QE input had “gone”. No critique of the coalition. The word austerity never came up. The phrase zero-lower bound was avoided. No attention was paid to the morals of which parts of society paid for the bail out. Iceland was not mentioned. Fiscal stimulus was not discussed. The appropriateness of contraction during a recession was avoided.

From what I could gather, King believes that the whole problem is due to irresponsible personal and national debt and the solution is… wait for it… sitting it out.

So, ultimately vacuous and pointless and dressed up in the kind of pompous sycophantic ceremony that reminded me of my years at boarding school where the blinkers were on and the noses were brown.

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