Mervyn King, Governor of the Bank of England, spoke last night at the University of Exeter on the subject of the Great Recession. His orthodox answer to current problems was globalisation: the entry of new mercantilist powers into the world trading system with resulting imbalances. He called for a quick reduction of the budget deficit and the role of the state as a domestic answer to the crisis. Most ominously of all, and in line with other commentators, he recognised that the underlying macroeconomic causes of the crisis have not been resolved.
Now that inflation is rapidly rising, and quantitative easing is running out, will King be caught on the horns of Labour's dilemma: public expenditure and money supply out of control...