BOE Chief: The US Faces The Same Issues As Greece, And Europe Has Only Kicked The Can Down The Road

The Business Insider ^ | 5-13-2010 | Joe Weisenthal

[blam]

Bank Of England Chief: The US Faces The Same Issues As Greece, And Europe Has Only Kicked The Can Down The Road

Joe Weisenthal
May. 13, 2010, 9:52 PM

Image: Bank of England

Lost in the shuffle over the past 24 hours were some surprisingly stiff comments from Mervyn King, the head of the Bank of England.

The Telegraph flags some of the interesting comments he made at a press conference, following the release of the BoE's latest inflation report.

Particularly notable is his warning to US and UK governments about debt

Every country around the world is in a similar position, even the United States; the world’s largest economy has a very large fiscal deficit. And one of the concerns in financial markets is clearly – how will this enormous stock of public debt be reduced over the next few years? And it’s very important that governments, both here and elsewhere, get to grips with this problem, have a clear approach and a very clear and credible approach to reducing the size of those deficits over, in our case, the lifetime of this parliament, in order to convince markets that they should be willing to continue to finance the very large sums of money that will be needed to be raised from financial markets over the next few years, at reasonable interest rates.

As for the Greek bailout, you can put him in the "kicking the can down the road" camp

...within the international community I think there is a very clear understanding that the package of financial support which was made available at the weekend is not an underlying solution to the problem.

[snip]

[mylife]

All Obama and this Admin have succeeded in doing, is kicking the can down the road, While robbing the taxpayer.

[mlocher]

There is no arguing his statement. Understand the motivation, however. As money leaves the Eurozone, it is primarily headed to the US, not the UK. The pound is also taking a “pounding” along with the Euro. He clearly wants a stronger pound and his message is for UK politicians to clean up their act, but is also targeted to investors, telling them that the US is not the safe haven they think.

[Greysard]

his message is for UK politicians to clean up their act, but is also targeted to investors, telling them that the US is not the safe haven they think.

The financial system of the entire world is sick. All currencies are paper money, they are not backed up with gold or other stable stores of value. Investors can only choose between sick currencies and bet that their choice will not go down in the nearest future.

There is, of course, the gold option. However gold earns no interest, and many investors must have it. Another huge trouble with gold is that reportedly more gold is sold than exists on Earth. Much of sold "gold" is paper certificates. As long as there is no run on the vaults, that paper works fine (as a free loan to the seller of the certificate.) But if there is a run and too many "owners" want the metal, there isn't enough metal to produce to satisfy that demand. I wouldn't be surprised if many "Swiss banks" that sold gold will disappear overnight, once the game is over.

[2001convSVT]

Yes, we all know that the US is kicking the "economic day of reckoning" can down the road! What I would like to know is when that "day of reckoning" will arrive, because I don't want to be anywhere near ground zero. So when is that day? one month, 6 months, 2 years, 6 years! The so called experts need to come out and tell us!