David Ignatius used his Washington Post column yesterday to give a glowing tribute to Mervyn King, the outgoing governor of the Bank Of England. The whole piece is a paean to King's wisdom that concludes by telling readers that King is:
"the only person I’ve ever seen who could intellectually intimidate former Treasury secretary Larry Summers. King couldn’t fix the British economy, but he did understand it."
While silencing Larry Summers is certainly commendable, the claim that King understands the economy is highly questionable. It was not just his job to fix the British economy, it was his job to prevent it from breaking in the first place.
King was running the Bank of England as the housing bubble grew to ever more dangerous levels. It should have been clear to King that this asset bubble would burst at some point and that it would have severe consequences for the UK economy. However he took no measures to rein it in, apparently oblivious to the dangers. As a result, the UK is now experiencing a downturn that is more severe than the Great Depression. That fact probably deserves some mention in a balanced assessment of King's record.
[Typos corrected from an earlier version.]