Newspaper article The Evening Standard (London, England)

Bye, Danny - the Bank Was Wrong to Ignore You

Newspaper article The Evening Standard (London, England)

Bye, Danny - the Bank Was Wrong to Ignore You

Article excerpt


Ifelt very desperate, i felt very alone in many ways. Not a comfortable time for me." this is how David "Danny" Blanchflower summed up most of 2008 at the Bank of england, and no wonder. Month after month, he urged fellow members of the monetary policy committee to cut interest rates to prevent recession, and month after month he was ignored because of concerns over rising inflation.

As long ago as January 2008, he accused the MPc of "fiddling while Rome burns" and it was not until after the collapse of lehman Brothers and near-meltdown of the entire financial system nine months later that Governor Mervyn King and the rest finally decided to act.

Since then, rates have been slashed from 5% to a record 315-year low of 0.5%.

So Blanchflower enters the Bank of england tomorrow for his final meeting as a member of the MPc vindicated.

Not that this will please him too much (or his plodding colleagues so wrongfooted by the crisis). the British-born US-based economist may have been right, but he wishes he could have done more to convince the rest of the MPc of his case.

"that was the position that i took. i was unable to persuade colleagues, and other people thought that inflation was the risk and i didn't," he said.

Blanchflower gives the impression that he can't wait to leave, and threadneedle Street that it can't wait to see him go.

they have not been easy bedfellows during the three years Blanchflower has been at the Bank of england, splitting his time between london and his home in New Hampshire where he is a professor of economics at Dartmouth college. But it was not just with the MPc that Blanchflower clashed. He was for a long time dismissed as a maverick in the city, in Westminster, by the media and beyond.

"externally they call me bonkers," he said. "Various former members of the MPc said i didn't know what i was talking about. i was shocked by how many commentators went along with the consensus and how little thought there was about alternatives. Newspapers were saying: 'Here he goes again'." Blanchf lower established himself as an arch-dove after joining the MPc in June 2006. in the face of rising inflation, he opposed rate rises, voted for cuts, and was often the only dissenting voice.

By the time Northern Rock imploded in September 2007, his credibility was in doubt -- but it was he alone who saw what was coming and he voted for rate cuts 18 months on the trot following the run on the Newcastle bank.

However, rates came down just three times in the year after the Rock fiasco, in December 2007 and in february and April 2008. it triggered the "fiddling while Rome burns" comment that marked the beginning of a very public and at times damaging spat over policy within the Bank of england. …

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