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The rift reopens

June 24, 2009

This is, in passing, another indicator that the economic crisis is far from resolved – and continues to produce sharp political disagreements:

Appearing before MPs at the Treasury select committee this afternoon, King rejected the chancellor’s budget forecasts, laid out in April, as too unambitious, saying that if the economy recovers as rapidly as Darling expects, the Treasury should act more urgently to bring borrowing down.

“We are confronted with a situation where the scale of deficits is truly extraordinary. This reflects the scale of the global downturn, but it also reflects the fact that we came into this crisis with fiscal policy on a path that wasn’t sustainable and a correction was needed,” he said.

Now King and Darling have squabbled before: the Treasury taking a broadly “Keynesian” line  (maintain spending, print  money) and the Bank, true to form, sticking to its 1930s role as keeper of the Fiscal Orthodoxy: hammer spending, avoid printing money. Last time round, the Treasury won out: Darling pushed King and co back into their box, borrowing continued to rise, and the Bank of England was pushed into “quantitative easing”.

Given all the recent – and basically hopelessly optimistic – talk of “green shoots”, you might expect this political row would be contained. Far from it. It’s a measure of how severely screwed the British economy is, and how little anyone running the thing has a clue how to deal with it, that once more King is taking up  cudgels against the Government. (Of course, the risk with having a much-proclaimed “independent” Bank of England is that they may display some independence on occasion… but presumably Brown knew that, back in 1997.)

But the nearest available political alternative – George Osborne in No.11, a truly awesome thought – is hardly likely to inspire confidence, as S&P’s re-rating of the UK’s creditworthiness made horribly clear.

No, we’re screwed; shit creek minus paddle, with two different captains squabbling over the tiller. Time, perhaps, for a mutiny?

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