Browse content similar to Adam Posen - Bank of England policy maker. Check below for episodes and series from the same categories and more!
Line | From | To | |
---|---|---|---|
unconditional talks. Now on BBC News it's time for HARDtalk. | :00:14. | :00:17. | |
Serious questions are being asked about the competence of economic | :00:17. | :00:24. | |
policy makers in the Western world. In the face of unsustainable debt, | :00:24. | :00:26. | |
dwindling growth, rising unemployment and a banking crisis, | :00:27. | :00:32. | |
have the responses been adequate to the challenge? My guest, Adam Posen, | :00:32. | :00:36. | |
is about to retire as one of the independent members of the Bank of | :00:36. | :00:46. | |
:00:46. | :00:53. | ||
England's Monetary Policy Committee. Why is managing the world's richest | :00:53. | :01:03. | |
:01:03. | :01:15. | ||
economies proving so difficult? Adam Posen, welcome to HARDtalk. | :01:15. | :01:19. | |
Thank you. You have spent three years in London advising the Bank | :01:19. | :01:24. | |
of England. During those three years we have seen an anaemic | :01:24. | :01:32. | |
economy in the UK and we have seen a double-dip recession. Are you | :01:32. | :01:36. | |
leaving with a sense of great disappointment? Sadness that we | :01:36. | :01:41. | |
were not able to do better. It was more about trying to make sure we | :01:41. | :01:46. | |
understood things correctly. The Bank of England did what we could. | :01:46. | :01:52. | |
Was the Monetary Policy Committee, was it consistently behind the | :01:52. | :01:58. | |
curve? That is what it has looked like to outsiders. Every Central | :01:58. | :02:06. | |
Bank and every economic policy maker was behind the curve in 2008. | :02:06. | :02:12. | |
I did not get there until September, 2009. We caught up very quickly. We | :02:12. | :02:18. | |
did great things. I did push for harder, more aggressive stimulus | :02:18. | :02:24. | |
policies starting in late 2010. It took a while for the rest of the | :02:24. | :02:28. | |
committee to go down that road map. That is where they were behind the | :02:28. | :02:38. | |
:02:38. | :02:40. | ||
curve. -- that route. It seems to me there is a fundamental problem. | :02:40. | :02:46. | |
That is, growth forecasts, inflation forecasts, the gritty | :02:46. | :02:51. | |
data you rely on has been consistently wrong over the last 3- | :02:51. | :03:01. | |
:03:01. | :03:09. | ||
4 years. It has been worse on the growth than the inflation. The | :03:09. | :03:15. | |
inflation forecasts we have got our Bayern -- broadly right. The growth | :03:15. | :03:20. | |
forecasts have been disappointing. People in the UK underestimated how | :03:20. | :03:25. | |
much of a drag austerity was going to be. I have said that from a long | :03:25. | :03:33. | |
time ago. Obviously, the eurozone is getting worse and worse and has | :03:33. | :03:39. | |
been a big part of that. He has said you were battling against | :03:39. | :03:45. | |
others inside the Monetary Policy Committee on the issue, in | :03:45. | :03:49. | |
particular on how much to loosen monetary policy and quantitative | :03:49. | :03:56. | |
easing. Pouring new money into buying government debt. You were on | :03:56. | :04:00. | |
the site of listening it dramatically and indulging in | :04:00. | :04:05. | |
quantitative easing. Others opposed you. Would have it made a | :04:05. | :04:09. | |
difference if you won the argument earlier? I do not think they are | :04:09. | :04:14. | |
posed me. They were worried about things that were not legitimate. | :04:14. | :04:19. | |
Like inflation expectations getting out of control. Wages going up too | :04:19. | :04:25. | |
fast. Credibility problems. All of which proved to be nonsense. | :04:25. | :04:35. | |
:04:35. | :04:36. | ||
they didn't. Inflation went up to 5%. When you get buffeted by the | :04:36. | :04:41. | |
storms, you do not move the fundamental instruments. The Bank | :04:41. | :04:45. | |
of England delivered what it was supposed to on inflation. Would it | :04:45. | :04:51. | |
have made a difference if we moved earlier? I think it would have. I | :04:51. | :04:55. | |
think investment would have been higher. In particular, I like to | :04:55. | :04:58. | |
think that consumption would have been higher over the last couple of | :04:58. | :05:06. | |
years. You have flip-flopped on this in recent times. You were an | :05:06. | :05:16. | |
:05:16. | :05:22. | ||
art advocate of quantitative easing. �370 billion, in April you had | :05:22. | :05:29. | |
declare enough had been done. Then in May you call for it again. | :05:29. | :05:35. | |
seem confused. It is made driving down this road, am I go in to take | :05:35. | :05:45. | |
:05:45. | :05:46. | ||
this exit or not? I think I'm almost there, I will take the next | :05:46. | :05:50. | |
one. It does not fill me with confidence that you as a policy- | :05:50. | :05:57. | |
maker no way you are going. We are in uncharted territory. This is | :05:57. | :06:02. | |
going down the road in uncharted territory. I got within one exit of | :06:02. | :06:12. | |
:06:12. | :06:14. | ||
getting it right. This isn't me going down the A4 to Heathrow. | :06:14. | :06:20. | |
Without stretching the metaphor too far, what sort of place is the UK | :06:20. | :06:25. | |
economy in right now? How much extra stimulus does it need? The | :06:25. | :06:29. | |
IMF looked at what you and your colleagues have been doing recently, | :06:29. | :06:34. | |
the advice he offered, they said Britain probably needs more | :06:34. | :06:42. | |
aggressive monetary policies. Think about lowering interest rates. | :06:42. | :06:45. | |
Talking about whether to lower interest rates and quantitative | :06:46. | :06:49. | |
easing, there is not a big distinction between them. What | :06:49. | :06:56. | |
happened was, I do not think flip- flopped is quite fair. Where I let | :06:56. | :07:00. | |
the data speak, we thought productivity was going to get | :07:00. | :07:09. | |
better ones we saw the private sector kept hiring. There is no way | :07:09. | :07:14. | |
that recession-hit businesses are going to keep adding employees. | :07:14. | :07:19. | |
There was reason to think we were not in a disaster. A lot of reports | :07:19. | :07:24. | |
are coming out saying we are not in the double-dip recession, we are | :07:24. | :07:30. | |
not in the tight contraction we had in 2008 and 2009. Things are still | :07:30. | :07:36. | |
unsatisfactory, but the UK economy, it is in a state of poor growth, | :07:36. | :07:39. | |
stagnation, we could be doing better with the potential we have | :07:39. | :07:44. | |
got. In terms of wider Europe, we are relatively lucky. The | :07:44. | :07:48. | |
unemployment rate is nowhere near as high as it is in Spain or | :07:48. | :07:54. | |
Portugal. It is still bad. Youth unemployment is particularly bad. | :07:54. | :07:58. | |
Yet, the government points to the fact that jobs are being created in | :07:58. | :08:02. | |
large numbers. How can that square with the fact that we are | :08:03. | :08:09. | |
technically in recession? Jobs are being created. That is why some of | :08:09. | :08:14. | |
us want to look past the technically in recession. Let's | :08:14. | :08:17. | |
focus on the big picture story. Mervyn King has also emphasised | :08:17. | :08:23. | |
this. We are not growing as fast as you normally would when coming out | :08:23. | :08:26. | |
of the recession. We are not in complete contraction because | :08:26. | :08:35. | |
private sector is adding jobs. On net. Youth unemployment is a real | :08:35. | :08:40. | |
problem as Alastair Darling just read about there is a call for | :08:40. | :08:48. | |
bipartisan ship on this. That is the one place where the UK labour | :08:48. | :08:56. | |
market is not healthy. Compare it to the US, Spain or Portugal, | :08:56. | :09:01. | |
participation rates in the US have come down. The UK market is working | :09:01. | :09:06. | |
well. The Federal Reserve in the country you know best has a remit | :09:06. | :09:11. | |
which is not just about keeping prices stable, but maximising | :09:11. | :09:16. | |
employment. The Bank of England does not have that remit. It is | :09:16. | :09:22. | |
only fixated on controlling inflation. Is that wrong? If you | :09:23. | :09:27. | |
read the remit carefully, it is given to us by Parliament and | :09:27. | :09:33. | |
confirmed by government. We are to keep inflation over the medium term | :09:33. | :09:37. | |
and to say in a way that is consistent with a stable growing | :09:37. | :09:41. | |
economy. We should not be shooting off like we did in the 70s. Doing | :09:41. | :09:49. | |
everything possible to pump up the economy through short-term measures. | :09:49. | :09:57. | |
We wanted to make sure the economy did not deflate... Not long ago you | :09:57. | :10:02. | |
said, the Bank of England should have bands and anguished religious | :10:02. | :10:12. | |
:10:12. | :10:13. | ||
ethic over just filed intervention. -- justified. It is not a problem | :10:13. | :10:18. | |
with the mandate. The problem the Bank of England had, the Bank of | :10:18. | :10:28. | |
:10:28. | :10:30. | ||
decide what assets the bank and buy the stock what intervention, the | :10:30. | :10:35. | |
form of the intervention. -- the bank can buy. Myself and other | :10:35. | :10:40. | |
members of the committee have suggested we should be buying other | :10:40. | :10:48. | |
things. That was the key way I feel we did not live up. Bundles of | :10:48. | :10:53. | |
private sector debt. Security debt. Special bonds being issued to | :10:53. | :10:58. | |
finance construction or infrastructure. The creative thing | :10:58. | :11:03. | |
that the Bank of England came out with is a step in that direction. I | :11:03. | :11:07. | |
would want the bank to do more to go around the banking system rather | :11:07. | :11:11. | |
than working with the current banking system. What about setting | :11:11. | :11:16. | |
up a public bank specifically to lend to small and medium-sized | :11:16. | :11:20. | |
enterprises which summed it all have admitted as the best way to | :11:20. | :11:29. | |
getting money? -- some people. 2010 and 2011 I gave two speeches | :11:29. | :11:34. | |
getting that issue onto the agenda. It has not been delivered. When you | :11:34. | :11:39. | |
say some people. Is that why you are leaving? You are frustrated. | :11:40. | :11:44. | |
I'm leaving because I came to the in a job | :11:44. | :11:51. | |
in Washington at the Institute I used to work out. It was a job I | :11:51. | :11:56. | |
could not refuse. There is a political context to this. We talk | :11:57. | :12:01. | |
about monetary policy. That is what your committee does. You have to | :12:01. | :12:06. | |
consider the wider economic context, which takes in fiscal policy, tax | :12:06. | :12:10. | |
and spend issues. You have been working for the Bank of England in | :12:10. | :12:15. | |
a country where the government is committed to an austerity programme. | :12:15. | :12:20. | |
Which I suspect you believe has in some ways been damaging, am I | :12:20. | :12:24. | |
right? I believe the short-term effects of the economy, what we | :12:24. | :12:29. | |
have seen in the last couple of years was predictable. It made | :12:29. | :12:32. | |
unemployment higher than it would have been. Consumption lower than | :12:32. | :12:38. | |
it would have been. It interfered with public investment. It is for | :12:38. | :12:43. | |
elected officials to decide what are the balances and risks. This | :12:43. | :12:47. | |
government won a majority on this ballot. They were very clear this | :12:47. | :12:53. | |
was what they were going to do. There are big ticket items that the | :12:53. | :12:58. | |
Bank of England should not be deciding. There was this idea in | :12:58. | :13:08. | |
:13:08. | :13:09. | ||
2010, if we do not do something we might end up like Grace. | :13:09. | :13:15. | |
appreciate the modesty. Mervyn King said in 2010, when the coalition | :13:15. | :13:20. | |
was being formed, he chose to give what can only be described as | :13:20. | :13:24. | |
backing to George Osborne's idea of eliminating the structural deficit | :13:24. | :13:29. | |
in the UK within the lifetime of a single parliament. He said, I am | :13:29. | :13:35. | |
very pleased there is a clear and binding commitment to accelerate | :13:35. | :13:41. | |
the reduction in the deficit. said on record before the Treasury | :13:41. | :13:46. | |
Select Committee in November 2010, I opposed to making that statement | :13:46. | :13:54. | |
internally. I have been on record since the early 2000s, the central | :13:54. | :14:04. | |
:14:04. | :14:09. | ||
banks have no business, -- commenting on fiscal policy. I do | :14:09. | :14:13. | |
not think unelected official should be doing it. The last 2.5 years you | :14:13. | :14:17. | |
have had to advise and work closely with this guy who you believe made | :14:17. | :14:23. | |
a fundamental and strategic error. We all have to work with different | :14:23. | :14:28. | |
kinds of people. Mervyn King is a true public servant. He is trying | :14:28. | :14:32. | |
to do the right thing for the economy. On that particular issue I | :14:32. | :14:36. | |
disagree. A huge issue. Do you think it is time for Mervyn King to | :14:37. | :14:42. | |
go? His term ends in less than one year. He will be succeeded by | :14:42. | :14:47. | |
someone else. He is the party will be no bad thing? The Governor has | :14:47. | :14:51. | |
been a true public seven for the bank and has done a lot of good | :14:51. | :14:55. | |
things. He has been very brave on a lot of issues and he has given me | :14:56. | :14:59. | |
and other members of the committee room to disagree with him. I am not | :14:59. | :15:06. | |
going to get into that. I'm not going to evaluate his job. In that | :15:06. | :15:11. | |
instance, I happen to disagree with him. I do nothing unelected | :15:11. | :15:21. | |
:15:21. | :15:26. | ||
officials should be speaking around It seems there is always, | :15:26. | :15:33. | |
particularly right now, a debate within top economists about whether | :15:33. | :15:39. | |
the current situation proves that in essence, King was right and the | :15:39. | :15:45. | |
government has to pump the economy. Somebody has to do it and it has to | :15:45. | :15:51. | |
be the government. Or, those who say absolutely not, at a time when | :15:51. | :15:56. | |
I get is the insurmountable problem, piling new deck is a mistake. The | :15:56. | :16:05. | |
private sector will deliver. have had the evidence on their side | :16:05. | :16:11. | |
and it has turned out to be right, those that follow King. They have | :16:11. | :16:20. | |
not won the argument because it was not all evidence base. Interest | :16:20. | :16:25. | |
rates will stay low when there is a lack of private sector demand. The | :16:25. | :16:30. | |
wages will stay low, the Government's I go in to not be held | :16:30. | :16:36. | |
under threat by a bond government. And they're fee for what to do with | :16:36. | :16:45. | |
their money. When you withdraw all add fiscal... All those things were | :16:45. | :16:51. | |
proving to be right by King. And by recent experience in the UK and | :16:51. | :17:01. | |
:17:01. | :17:02. | ||
when I wait in Japan. You know... I do not know why... Except in a | :17:02. | :17:07. | |
Europe with the sovereign debt crisis upon a sovereign debt crisis. | :17:07. | :17:13. | |
You argue that you build up more dead. It is not a desperate effort, | :17:13. | :17:18. | |
it is a necessary effort because we are in desperate situations. It is | :17:18. | :17:28. | |
:17:28. | :17:32. | ||
why you spend it on. As a different economists have said, 20 economise, | :17:32. | :17:39. | |
none of whom have said we should do constructive public sector | :17:39. | :17:42. | |
investment, you should not cut investment because what you spend | :17:42. | :17:47. | |
it on and at what price. As interest rates are more -- lowered | :17:47. | :17:51. | |
it does not make any sense to sit on the money. These arguments go | :17:51. | :17:56. | |
far beyond the UK. Talking about the euro's on, mauve and King, the | :17:56. | :18:00. | |
Governor of the Bank of England, has always said the greatest threat | :18:00. | :18:05. | |
to the UK economy is the crisis in the eurozone getting worse and the | :18:05. | :18:11. | |
prospect of a possible break-up, do you agree? I agree that if it will | :18:11. | :18:15. | |
get worse, it will overwhelm the UK economy in ways we cannot do much | :18:15. | :18:21. | |
about. You know Germany very well, when you look at the argument | :18:21. | :18:29. | |
raging in Germany about whether to front up and guarantee the debts of | :18:29. | :18:33. | |
the very weak Sovereign's around the southern periphery of a Europe, | :18:33. | :18:38. | |
do you believe that in the end, for political and constitutional | :18:39. | :18:46. | |
reasons, there is going to be we constituting of the euro, for | :18:47. | :18:52. | |
example Greece leaving Europe? is in Germany's interests, its | :18:52. | :18:58. | |
commercial and economic interest not just its idealistic injures, to | :18:58. | :19:03. | |
restructure the debt. This is a mere -- mirror image of one Germany | :19:03. | :19:08. | |
went through after World War One. For Germany to take the heat. | :19:09. | :19:12. | |
Germany's lenders who made the mistake of lending to all these | :19:12. | :19:15. | |
countries. They had to get the money from somewhere. It was a | :19:15. | :19:20. | |
German government decision and Austrian banks and Dutch fans who | :19:20. | :19:24. | |
lent the money to all these countries and they lend the money | :19:24. | :19:27. | |
to countries and companies so they could buy German exports. Germany | :19:27. | :19:32. | |
has been running, just as some prime lenders in the US, they had | :19:32. | :19:36. | |
been running a scheme in the Rhone pingers. You want to restructure | :19:36. | :19:42. | |
the debt. You can not make it all under borrow. Somehow it has to be | :19:42. | :19:47. | |
more has an allowance. But at the Economist magazine ran a cover the | :19:47. | :19:50. | |
other day, suggesting Angela Merkel is reaching a point of decision | :19:50. | :19:55. | |
where she may look at the balance of the equation, when it comes to | :19:55. | :20:02. | |
his campaign, and decide it is less long-term risk to supervise a | :20:02. | :20:09. | |
break-up of the eurozone than continue down the path. That will | :20:09. | :20:14. | |
be a ill-advised move. It is pure political pandering to pretend | :20:14. | :20:19. | |
otherwise. The currency would should through the roof, the trade | :20:19. | :20:25. | |
relations would be disrupted, the banks will be on the Ballard least. | :20:25. | :20:29. | |
You would reinforce that incentives. You would reinforce and narrative | :20:29. | :20:36. | |
in Germany that makes no sense that it was morally light and -- right | :20:37. | :20:46. | |
:20:47. | :20:51. | ||
to pay dud mack... There is democracy as well as economics. As | :20:51. | :20:56. | |
long as the people are prepared to take the pain, that is not viable. | :20:56. | :21:02. | |
All the pain they are going to get... If they did a proper debt | :21:02. | :21:09. | |
restructuring, they would get some losses in the banking system but | :21:09. | :21:14. | |
that would be it. Trade, export would go on, the losses would be | :21:14. | :21:17. | |
slower, the would-be political stability, the currency would not | :21:17. | :21:22. | |
decreasing at, the banks would dud mack maybe you're right but frankly, | :21:22. | :21:30. | |
Germans may not believe. Just one final question on Europe, the boss | :21:30. | :21:36. | |
of the European Central Bank has said all summer that the ECB will | :21:36. | :21:41. | |
do whatever it takes to ensure stabilisation and stability in the | :21:41. | :21:48. | |
euro's on. His back trouble? I wish they would get on with it -- is | :21:48. | :21:55. | |
that incredible? I wish they would get on with it. I do not think the | :21:56. | :22:01. | |
ECB has any business sang very risks to the eurozone bullet in our | :22:01. | :22:08. | |
response until we see the fiscal measures we like. In Italy, there | :22:08. | :22:13. | |
are shutdowns in the bond market. They are undermining the eurozone | :22:13. | :22:18. | |
and the world economy. On your political point, it is not about | :22:18. | :22:25. | |
economics. Angela Merkel is free. She is an elected official. She has | :22:25. | :22:30. | |
every right to say she will not bail out those countries. But from | :22:30. | :22:35. | |
the economics, it would be a self- inflicted wounds. I would hope she | :22:35. | :22:40. | |
would explain the true to the people rather than pander to them. | :22:40. | :22:45. | |
You are going home to the US to run an influential economic think tank. | :22:45. | :22:50. | |
Do you have any confidence they are in better hands than in Europe? | :22:50. | :22:57. | |
much. When you look at the election, considering that Mitt Romney is | :22:57. | :23:03. | |
taking on Paul Ryan as his running mate who envisages the most | :23:03. | :23:10. | |
swingeing cut to the Federal Budget and activity in the next decade, is | :23:10. | :23:14. | |
there now that clear-cut government which will be the centrepiece of | :23:14. | :23:20. | |
the election? That is my optimistic take. I am hoping that by me | :23:20. | :23:30. | |
running decided to make Brian his running mate, we will have a debate | :23:30. | :23:36. | |
-- Paul Ryan. Things will have to come out in public. When you talk | :23:36. | :23:42. | |
about cuts, one of the things that has happened, since Paul Ryan has | :23:42. | :23:46. | |
been nominated, is we have had some stuff about about his numbers and | :23:46. | :23:53. | |
make the economic advisers looking in out to make his numbers were. We | :23:53. | :23:58. | |
need to make sure the numbers work. It could be a good election. Some | :23:58. | :24:07. | |
senior Democrats including the core author of the plant to get rid of | :24:07. | :24:14. | |
the deficit, has praise Paul Ryan who he says has a sensible Budget | :24:14. | :24:20. | |
plan. I do not want to praise politician one way or another. I do | :24:20. | :24:25. | |
know that on the numbers, the current plans as examined by the | :24:25. | :24:34. |