October 7, 2011

Financial crisis could be worst ever

by Jan Harris

The financial crisis of the 1930s was dubbed the Great Depression, but the current crisis could be even greater, according to Bank of England governor Sir Mervyn King.

Growing fears of a double-dip recession have led the Bank to announce another injection of £75bn into the economy through a further round of quantitative easing (QE).

Speaking to Sky News, Mr King said there is not enough money in the economy.

“That may seem unfamiliar to people,” he said, “but that’s because this is the most serious financial crisis at least since the 1930s, if not ever.”

The injection of cash, which will take place over a four-month period, will see the asset purchase scheme expanded, with the Bank buying government bonds from commercial banks in order to boost lending.

The Bank of England will use electronically creating money to purchase the bonds, thereby pushing more money into the economy.

Chancellor George Osborne supported Mr King’s comment over the severity of the crisis.

Although he has previously spoken out against ‘printing money’ he supported the latest round of QE in an interview on BBC Radio 4′s Today programme.

Earlier rounds of QE have already pumped £200bn into the economy.

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