Over the past months, many experts and policy-makers have voiced their concerns over the state of the world economy. In a new development, the former governor of the Bank of England, Mervyn King has stated that the global economy is heading towards a new financial meltdown. He actually used the word ‘sleepwalking’ to indicate the situation. Considering the stature of King as the former head of one of the world’s most influential central banks, it is a telling comment. More importantly, King had been in charge of the Bank of England during the dark days of the financial crisis back in 2008-09.
The comments were made during a lecture delivered at the annual meeting of the International Monetary Fund in Washington. King said,
Another economic and financial crisis would be devastating to the legitimacy of a democratic market system. By sticking to the new orthodoxy of monetary policy and pretending that we have made the banking system safe, we are sleepwalking towards that crisis.
He went on to add that the issues that had actually led to the original financial crisis more than a decade ago remain in place. No fundamental change in approach has taken place yet, he added.
While King did speak about the issues related to the global economy and an impending crisis, he elaborated on the responsibilities of the United States Federal Reserve as well. King said that it is the responsibility of the Federal Reserve to work proactively and stop the recurrence of another financial crisis like the one back in 2008. He added that if the Federal Reserve did not take the right steps, then the United States could find itself in the middle of a ‘financial Armageddon.’ Such pronouncements have been made by many other experts over the past few months and it remains to be seen how the policymakers respond.