It looks like the governor of the Bank of England, Mervyn King, has shown two fingers to UK Prime Minister Gordon Brown. King has said there should not be another fiscal expansion in the forthcoming budget for the British economy. Then, it looks like the governor repeated the message in a visit to the Queen, possibly saying how bad the financial situation is.
There is going to be a wave of gilt issuance and I don't think the foreign investors will have much of an appetite for UK government paper. Perhaps it will have to be marketed to domestic investors. Retail ones are not major buyers of gilts but they could be if the bonds could be easily bought in the Post Office for example.
We talk of deflation but then we are in an academic pickle with the consumer price index (CPI), which goes up from 3 pct to 3.2 pct. The price of imported foods has been shooting up and it would be nice for the pound to rise a bit, just when I am planning to go to France in the summer.
Bank of England monetary committee member David Blanchflower has made trenchant comments in favour of major public works to offset the growing rise in unemployment.
Having a coherent roads programme would help and we have already got the Olympics with quite a few jobs going to foreigners.
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