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The war of words between Bank of England Governor Mervyn King and former colleague David "Danny" Blanchflower escalated tonight when Blanchflower spoke of "overbearing tyranny" on Threadneedle Street.
Blanchflower, who left the Bank's monetary policy committee at the end of May, went back on the offensive after King branded his decision to publish a behind-the-scenes account of events at the Bank "unwise" and "not sensible".
Blanchflower said: "I guess my main reaction is to say that it is the role of an independent member to speak up in the interests of the British people. I disagreed with the overbearing tyranny. People are too scared to speak out."
The extraordinary outburst came after days of mudslinging between King and Blanchflower and cast further light on tensions at the top of the Bank. Blanchflower said he nearly quit in August last year because he was alone in spotting the looming recession.
In an article for the New Statesman last week, Blanchflower said the MPC rejected his calls for early cuts in interest rates because it was "hobbled by group think".
He wrote: "King, the old iron fist of the Bank of England, with his hawkish views on rates, dominated the MPC. Short shrift was given to alternative, dovish views such as mine." King was yesterday forced to defend himself in front of MPs on the Treasury Select Committee.
"You can decide for yourself whether I have this iron fist, but look at my voting record," he said. "Danny's recollection of events do not coincide with mine."
King also dismissed Blanchflower's claim that early rate cuts could have prevented such a deep recession.
"I don't think the interest rate cuts Professor Blanchflower was voting for would have made an awful lot of difference," he said.
Blanchflower's response was scathing. "If, as King argues, cutting rates earlier would have done little, then I guess his view is that we do not need an MPC, as it is - according to his view - entirely powerless," he told the New Statesman. He also defended his criticism of the Bank.
"It's what the British people should expect from an independent member," he said. "I realised the MPC had made a mistake that needed correcting so I spoke up. With hindsight, it turns out I was right."
Reader views (1)
Mr Branch flower says "I guess my main reaction is to say that it is the role of an independent member to speak up in the interests of the British people. I disagreed with the overbearing tyranny."
The role of an independent member is to speak up. Why did he not resign earlier and speak up before the fall of the edifice?
Mr Blanchflower's advocacy of low interest rate during the boom, despite the the out of control asset prices is the kind of policy that was the mother and father of unwise lending and even worse over borrowing that brought this debacle.
- Raj, uk, 17/09/2009 11:28
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