A currency war is possible as central banks keep relaxing monetary policy, former Bank of England Governor Mervyn King said. "With interest rates close to zero, in some cases below, with fiscal policy constrained in many countries, the objective of economic policy will be to lower the exchange rate," he said. "There is a real risk that focusing attention on bringing the exchange rate down will become an implicit or explicit currency war."
Mervyn King, governor of the Bank of England, has expressed more doubts about a proposed tax on financial transactions in Europe. "Within Europe, I can't find anyone in the central-banking community who thinks it's a good idea," King said, noting "enormous scepticism", even among those who support the levy.
Economists expect policymakers at the Bank of England to maintain the central bank's £75 billion bond-purchase program, as they wait for answers from European officials to resolve the sovereign-debt crisis. BoE Governor Mervyn King said Europe's debt turmoil is beyond his control.
Britain faces such an overwhelming debt load that analysts said the winner of the general election would be forced to implement harsh tax increases and spending cuts, possibly leading him to never govern again. Sovereign debt accounts for £1 of £4 spent by the government. Economist David Hale said Bank of England Governor Mervyn King told him "whoever wins will be out of power for a whole generation because of how tough the fiscal austerity will have to be."
Bank of England Governor Mervyn King, U.S. Treasury Secretary Timothy Geithner, and other financial industry experts and insiders acknowledge that changes are needed to banks' required capital ratios. However, exactly how much money banks would need to hold in their rainy day funds remains a point of debate.