King is an advocate of tight monetary policy (Getty)
Money analysts conjure while they are watching Inflation runaway In the world, wallets Bank of England The former Bank of England, Mervyn King, is awaiting the decisions and statements of the US Federal Reserve Governor, Jerome Powell, and other central bank governors, especially in light of the runaway inflation in many countries.
King invented the “Maradona theory” of monetary policy, as it is evident that central bankers often manage the expectations of market actors, without deviating from the goals they set. Is this possible today in light of the runaway inflation?
Mervyn King was a huge lover of sports or all sports. He excelled in the game of tennis, and joined the board of directors of the most famous and prestigious Wimbledon tournament in the world.
This is a competition, likening it to the City of London: that competition and the City are number one in the world in their fields, and they have a common denominator in the fact that they are foreigners.
He is the author of the “Maradona” theory that he applied to monetary policy, a theory inspired by the 1986 World Cup quarter-final match in Mexico, which brought together the teams of England and Argentina, which ended with the victory of the Latin American team thanks to the legend Diego Armando Maradona, who awarded his country the Cup of that session that took place. In Mexico, following he decisively contributed to the defeat of Germany in the final.
Before he took charge of the Bank of England for ten years, King was the chief economist and deputy governor of the Bank, but before that, he was a professor of economics, he is a central banker, like Ben Bernanke, who came from the academic world and not from the world of finance or management.
King, 74, who is a fan of the Aston Villa football team, is an advocate of tight monetary policy, as he believes that monetary policy should be expected as much as possible, by focusing on setting an inflation target by the English central, ie 2 in cent.
The governor who took charge of the central bank between 2003 and 2013 liked to invoke football when talking regarding monetary policy. The owner of the “Maradona theory” liked to talk regarding the Argentine legend’s goal once morest England. In that match, Maradona scored two goals, which remained immortal in the annals of the World Cup competitions.
The first goal, which sparked a lot of controversy, and the second goal was miraculous, he scored following he managed from the middle of the field to get rid of the England midfielders and defense before depositing the ball into the net.
Maradona scored the first goal with his own hand, as he called it “the hand of God” in the context of protests that are not without admiration for this super creative, but it is the second goal that interests King the most, as he compares it to monetary policy as managed by central banks.
He went on to say that the way Maradona played perfectly sums up the way central banks work. He considered the goal he scored once morest England to refer to classical banking, as he was shrouded in ambiguity, and was lucky, as a rule-breaker.
King, 74, a fan of the Aston Villa football team, is an advocate of tight monetary policy, and believes that monetary policy should be as predictable as possible.
The first goal scored by hand grabbed the spotlight from the second goal, which was scored in a wonderful way, as the legend went in a straight line towards the goal, bypassing five England players, how did he manage that?
The former governor who joined the House of Lords in 2013 answers that the five English defenders acted from the situation in which Maradona was, they believed that he would veer right or left, while he managed to go in a straight line until he scored the second goal.
He considers that this goal is an ideal embodiment of one of the monetary policy tools at the present time, which is to manage expectations. The central bank, which enjoys credibility, can move in a straight line, that is, remain loyal to its policy without caring regarding the crisis and leave the markets to act instead.
These banks influence the interest rate markets through their rhetoric that hints at a kind of toughness or kindness. In this way, they can control the economy and markets without having to change their monetary policies.
King imagined himself as soccer legend Maradona running a straight line to score an anti-inflation goal, by not changing the key interest rate, but evoking market expectations. He left the ECB in July 2013, but his theory continues to attract attention.
