Wed Jan 30th, 2008 at 10:09:10 AM EST
One of the few useful things I learned in my 9 to 5 job years ago was the business adage, "If you find yourself in a hole, the first thing you do is stop digging." Well, what was decided last week at the World Economic Summit in Davos about the systemic solvency crises unleashed by the debacle in U.S. subprime mortgages has been made rather clear today: we're going to keep on digging. British Prime Minister Gordon Brown announced that he intends to give Mervyn King a second five-year term as governor of the Bank of England, the central bank of the United Kingdom. King's current term ends in July.
In other words, it's business as usual. The British Prime Minister is not about to change the system, even though the system is broken, beset by a series of credit crises, and in the process of bankrupting millions of families in Britain and the United States. (There is -- correction, was -- a housing bubble in jolly old England, also, and it has burst, too). There is actually more trading in financial derivatives in London, than in New York, according to the Bank for International Settlements. It is also expected that London will soon surpass New York in the volume of equity trading also, which American movement conservatives are wailing about, blaming the Sarbane-Oxley reforms instituted after the Enron scandal for forcing financial players to find more friendly sandboxes to play in overseas.
The rationale was easily gleaned from the quotes of the financiers in the City of London, carried in The London Telegraph:
Howard Archer, Managing Director of European Forecasting and Analysis for Global Insight, a company which existence is due entirely to the privatization and termination of government economic statistics keeping, especially in the U.S. and Britain:
"There is no denying that there has been some tarnishing of Mr. King's previously exemplary reputation due to the Bank of England's handling of the Northern Rock problem, while the Bank of England should probably also have been more active in helping financial institutions with funding in the early stages of the credit crunch.
"Nevertheless, we believe that Mr. King has done an excellent job in conducting monetary policy over his term as governor and that is the over-riding factor. We also believe that there is no better candidate to replace him."
Rob Carnell, chief economist at ING, the Dutch insurance and banking conglomerate:
"He is very well regarded as a governor and there will be a sigh of relief from the City."
Amit Kara, the top economist of the London operations of Swiss bank UBS AG (UBS), Europe's fifth-biggest bank by market capitalization and the world's largest wealth manager:
"It's clearly a sign of the Treasury wanting to maintain stability and confidence in the system.'