Bank of England Chief Mervyn King: Standard of Living To Plunge At Fastest Rate Since 1920s!

• Are we still in denial? Recovery? What recovery? The BOE chief has now come out and publicly stated the obvious. This is Great Depression 2.0 and it is far worse than the first Great Depression. The United Kingdom is cratering. No amount of QE will help. If you can create money out of thin air to engineer economic growth, it would have been done many times in the past.
   
• The reality is: almost all industrialized nations are bankrupt! The Eurozone is bankrupt with debts to GDP at 80-100%(based on their shady official statistics, it is likely well above 150%), Japan is bankrupt with debts to GDP above 200% and the United States is bankrupt with debt to GDP at 100% (if you take only the current liabilities at US$14T). Taking into account social security, Medicare, GSE … debts and liabilities, America’s debts is probably close to US$200T!
   
• How do you tell when politician snakes lie? Whenever they move their lips! America, Eurozone and Japan have embarked on QE. This will not end, QE2 will be followed by QE3, 4, 5 ….. 100. Until their currencies: USD, UKP, Euro and Yen become toilet paper. Such currency debasement implies hyperinflation. Make sure you get real money as insurance against devaluation. Got gold yet?
    
• Be wary of politician snakes with their crocodile tears of empathy for Main Street. They serve their Illuminist bankster masters! Subtlety and deception, that is all it is!
   
  Bank of England chief Mervyn King: standard of living to plunge at fastest rate since 1920s
  Households face the most dramatic squeeze in living standards since the 1920s, the Governor of the Bank of England warned, as he reacted to the shock disclosure that the economy was shrinking again.
    
  Families will see their disposable income eaten up as they “pay the inevitable price” for the financial crisis, Mervyn King warned. With wages failing to keep pace with rising inflation, workers’ take- home pay will end the year worth the same as in 2005 — the most prolonged fall in living standards for more than 80 years, he claimed.
   
  Mr King issued the warning in a speech in Newcastle upon Tyne after official figures showed that gross domestic product fell by 0.5 per cent during the final three months last year. The Government blamed the unexpected reduction — the first since the third quarter of 2009 — on the freezing weather that paralysed much of the country last month.
   
  But there were fears that the country was poised to slip back into recession, defined as two successive quarters of negative growth. Economists said the situation was “an absolute disaster”. The economic gloom deepened this morning as figures showed that mortgage lending by the major banks dived to an 11-and-a-half-year low during December.
    
  Net lending, which strips out redemptions and repayments, fell to £880 million during the month, the lowest level since June 1999, according to the British Bankers’ Association. Labour has accused ministers of jeopardising recovery by pushing ahead with public spending cuts too quickly.
   
  Mr King said he was unable to offer any imminent hope of a rise in interest rates in coming months because of the poor economic outlook. Savers and “those who behaved prudently” would be among the biggest losers in the squeeze, he admitted.
   
  Disposable household income has been hit by sharp increases in the cost of food, fuel and tax, coupled with restricted wage rises for most workers. Last year, take-home pay fell by about 12 per cent, official figures showed, and the trend was expected to continue in 2011. The governor warned that the Bank “neither can, nor should try to, prevent the squeeze in living standards”.
   
  He said that the economic figures were a reminder that the recovery will be “choppy”. However, he said the biggest threat facing the Bank’s Monetary Policy Committee, which sets interest rates, was rising inflation. The Bank is expected to use interest rates to keep inflation below two per cent, but the governor said inflation could rise “to somewhere between four per cent and five per cent over the next few months”.
   
  He claimed that rising inflation had been caused largely by increases in global oil and commodity prices, and tax rises such as the increase in VAT introduced at the beginning of the year, which the Bank was powerless to control. “In 2011, real wages are likely to be no higher than they were in 2005,” he said. “One has to go back to the 1920s to find a time when real wages fell over a period of six years.
   
  “The squeeze on living standards is the inevitable price to pay for the financial crisis and subsequent rebalancing of the world and UK economies.” Mr King insisted that the Monetary Policy Committee could not have increased interest rates from their current record low level to tackle the rise in inflation.
   
  “If the MPC had raised the Bank Rate significantly, inflation might well have started to fall back this year, but only because the recovery would have been slower, unemployment higher and average earnings rising even more slowly than now,” he said.
   
  “The erosion of living standards would have been even greater. The idea that the MPC could have preserved living standards, by preventing the rise in inflation without also pushing down earnings growth further, is wishful thinking.”
   
  He added: “Monetary policy cannot be based on wishful thinking. So, unpleasant though it is, the Monetary Policy Committee neither can, nor should try to, prevent the squeeze in living standards, half of which is coming in the form of higher prices and half in earnings rising at a rate lower than normal.” “The Bank of England cannot prevent the squeeze on real take-home pay that so many families are now beginning to realise is the legacy of the banking crisis and the need to rebalance our economy.”
   
  The comments represented one of the governor’s starkest warnings yet. His claim that the banking crisis was behind the ongoing squeeze on living standards comes at a sensitive time, as banks prepare to announce multi-million pound bonuses for their executives.

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