Leading Article: There is no magic bullet

Share
Related Topics

Charles Bean, the Deputy Governor of the Bank of England, probably wishes he had chosen his words a little more carefully. No one wants to hear from one of the stewards of our economy that he and his colleagues have their "fingers crossed" that things will improve, or that the slowdown is likely to "drag on for some considerable time". What people want in turbulent economic times is precision and a plan, not airy fatalism.

But the problem is that Mr Bean was merely articulating the prevailing view, not just of the Bank of England, but of the world's central bankers. The annual meeting of the heads of national monetary policy in Jackson Hole, Wyoming (where Mr Bean made his comments), has rarely met in more fraught international circumstances. The banking crisis has combined with a sharp economic slowdown in Western economies and a global spike in commodity prices.

And the heads of the central banks have never been less sure about what to expect next from the global economy. The chairman of the US Federal Reserve, Ben Bernanke, has described the inflation outlook as "highly uncertain". The former deputy governor of the Bank of Japan, Yutaka Yamaguchi, has spoken of "exceptional uncertainty". Peter Fisher, a former Fed official, urged his fellow attendees to "admit to be puzzled". Some believe that the major danger is inflation. Others have an inkling that rising prices will soon give way to a serious bout of deflation. Some judge that the credit crunch is almost over. Others expect yet more banks to go bust. But no one is apparently willing to make any firm predictions either way.

This uncertainty has been reflected in the diversity of policy responses from central banks. The Federal Reserve has cut interest rates sharply since last summer. The Bank of England has followed, but on a much lesser scale. The European Central Bank has raised rates. And it is too early to tell which has been the correct response. Output has shrunk in Europe and ground to a halt in Britain. But lower rates have not stemmed the collapse of the American housing market nor delivered the US from recession.

The idea that there is an economic "magic bullet" that might restore our economies to health is, sadly, a fantasy. Mr Bean's choice of words might have been infelicitous, but the sentiment it reflected was wholly realistic.

React Now

Latest stories from i100
iJobs Job Widget
iJobs General

Recruitment Genius: Key Sales Account Manager - OTE £35,000

£25000 - £35000 per annum: Recruitment Genius: Have you got a proven track rec...

Recruitment Genius: Sales Executive - OTE £40,000

£15000 - £18000 per annum: Recruitment Genius: This is a great opportunity for...

Recruitment Genius: Senior Designer / Design Director

£38000 - £48000 per annum: Recruitment Genius: This B2B content marketing agen...

Austen Lloyd: Law Costs HOD - Southampton

£50000 - £60000 per annum + Excellent Salary: Austen Lloyd: An outstanding new...

Day In a Page

Read Next
David Cameron visiting a primary school last year  

The only choice in schools is between the one you want and the ones you don’t

Jane Merrick
Zoë Ball says having her two children was the best thing ever to happen to her  

Start a family – you’ll never have to go out again

John Mullin
Syrian conflict is the world's first 'climate change war', say scientists, but it won't be the last one

Climate change key in Syrian conflict

And it will trigger more war in future
How I outwitted the Gestapo

How I outwitted the Gestapo

My life as a Jew in wartime Berlin
The nation's favourite animal revealed

The nation's favourite animal revealed

Women like cuddly creatures whilst men like creepy-crawlies
Is this the way to get young people to vote?

Getting young people to vote

From #VOTESELFISH to Bite the Ballot
Poldark star Heida Reed: 'I don't think a single bodice gets ripped'

Poldark star Heida Reed

'I don't think a single bodice gets ripped'
The difference between America and Israel? There isn’t one

The difference between America and Israel? There isn’t one

Netanyahu knows he can get away with anything in America, says Robert Fisk
Families clubbing together to build their own affordable accommodation

Do It Yourself approach to securing a new house

Community land trusts marking a new trend for taking the initiative away from developers
Head of WWF UK: We didn’t send Cameron to the Arctic to see green ideas freeze

David Nussbaum: We didn’t send Cameron to the Arctic to see green ideas freeze

The head of WWF UK remains sanguine despite the Government’s failure to live up to its pledges on the environment
Author Kazuo Ishiguro on being inspired by shoot-outs and samurai

Author Kazuo Ishiguro on being inspired by shoot-outs and samurai

Set in a mythologised 5th-century Britain, ‘The Buried Giant’ is a strange beast
With money, corruption and drugs, this monk fears Buddhism in Thailand is a ‘poisoned fruit’

Money, corruption and drugs

The monk who fears Buddhism in Thailand is a ‘poisoned fruit’
America's first slavery museum established at Django Unchained plantation - 150 years after slavery outlawed

150 years after it was outlawed...

... America's first slavery museum is established in Louisiana
Kelly Clarkson: How I snubbed Simon Cowell and become a Grammy-winning superstar

Kelly Clarkson: How I snubbed Simon Cowell and become a Grammy-winning superstar

The first 'American Idol' winner on how she manages to remain her own woman – Jane Austen fascination and all
Tony Oursler on exploring our uneasy relationship with technology with his new show

You won't believe your eyes

Tony Oursler's new show explores our uneasy relationship with technology. He's one of a growing number of artists with that preoccupation
Ian Herbert: Peter Moores must go. He should never have been brought back to fail again

Moores must go. He should never have been brought back to fail again

The England coach leaves players to find solutions - which makes you wonder where he adds value, says Ian Herbert
War with Isis: Fears that the looming battle for Mosul will unleash 'a million refugees'

The battle for Mosul will unleash 'a million refugees'

Aid agencies prepare for vast exodus following planned Iraqi offensive against the Isis-held city, reports Patrick Cockburn