On Mervyn King's Apology That Central Banks Are Destroying The Middle Class' Standard Of Living

Tyler Durden's picture

Recently, BOE head Mervyn King came out with a very surprising warning to his compatriots, accompanied with an apology that our own Ben Bernanke will never offer, namely: "I sympathise completely with savers and those who behaved prudently
now find themselves among the biggest losers from this crisis.
" Of course, the US central bank believes it has completed its third mandate job now that the US stock market, not to mention commodities, are starting to be reminiscent of the parabolic phase of the Harare stock market. But back in Europe, even as the EURUSD is surging (killing the dollar, and the primary driver behind US stocks) now that it is accepted that the continent will proceed with its latest full on ponzi scheme and have the EFSF acquire insolvent bonds, even as the ECB proceeds to raise rates, things are getting worse. This is precisely what King warned about in a speech that not surprisingly got absolutely no coverage in the US. Luckily, here is Simon Black's take on the very surprising speech by King which confirmed that the only beneficiaries of Bernanke's policies continue to be the top 1% that make up the financial oligarchy.... as always.

A stern warning from a central banker, by Sovereign Man

Mervyn King is Britain’s chief central banker and a key figure in the
global financial system. Last week, after surprising reports surfaced
that the British economy had once again contracted in the 4th quarter of
last year, King delivered a stern, sobering message to his country:

- “In 2011, real wages are likely to be no higher than they were in
2005… One has to go back to the 1920s to find a time when real wages
fell over a period of six years.”

- “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 squeeze on living standards is the inevitable price to pay for
the financial crisis and subsequent rebalancing of the world and UK
economies.”

- Furthermore, inflation may rise “to somewhere between four per cent and five per cent over the next few months.”

- “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.”

- “[U]npleasant 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.”

- “I sympathise completely with savers and those who behaved
prudently now find themselves among the biggest losers from this
crisis.”

To summarize, one of the world’s leading central bankers has looked
his country in the eye and admitted that he is completely powerless to
prevent the inevitable decline in living standards that will result from
years of reckless behavior.

It’s amazing that someone in his position would be so terse, so
direct in his appraisal of the situation; by nature of their positions,
central bankers are serial liars who must continually deceive the public
in order to set expectations and carry out their agenda.

King’s statement may be a sign that England is finally on its last
leg. Fiscally, the country is in a similar situation as the US and
Europe– in debt up to its eyeballs, hemorrhaging cash, and quickly
losing the confidence of the international community.

Unlike Europe, the US, and even Japan to a degree, England lacks
reserve currency status in any measure that matters… so without a line
of foreigners to buy its debt regardless of the fundamentals, the UK has
been forced into its day of reckoning before the others.

Meanwhile, Europe and the US continue to spin unjustified confidence;
Angela Merkel and Nicolas Sarkozy have pinkie-sworn that they will not
let the euro fail, and Barack Obama’s State of the Union address
provided a temporary ‘feel-good’ blip that the government is going to
fix everything.

People should not be fooled, however, into thinking that the US,
Europe, Japan (and those nations which depend heavily upon them) will
fare any better than England.

Because of its place in the global pecking order, England has less
control over its financial destiny and has had to face the music first,
but it will not be the only member of the Western hierarchy to fall.

Europe is in a desperate situation to continue bailing out bankrupt
members of the eurozone even though the price tag will soon become
larger than the monetary union can possibly bear, all while stimulus
pressures and strained pension programs create challenges even for the
‘healthy’ euro nations.

Meanwhile in the US, the government plans to continue running
trillion dollar deficits for the next several years with no end in sight
to runaway spending, not even considering the upcoming carnage that
will occur when cities and states start to go bust, or social security
runs out of money.

Japan is probably in the worst shape of all, simultaneously suffering
both a fiscal and demographic crisis. Japan’s debt, well over 100% of
its GDP, has already been downgraded by the rating agency monkeys, and
its population is slowly disappearing due to low birth rates and
inhospitable immigration policy.

The best case that these countries can hope for is to suffer the same
fate as England: a significant reduction in standard of living.

There is an opportunity now, however, for everyone to assess their
basic vulnerabilities and take steps to mitigate what may lie ahead.
This may include seeking work overseas, expanding a business to broader
services in new markets, moving assets to safer jurisdictions, reducing
system dependency, etc.