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Mark Carney issues warning over first 'lost economic decade' for 150 years Mark Carney issues warning over first 'lost economic decade' for 150 years
(about 2 hours later)
Mark Carney has warned that government and industry must do their part to spur growth and ensure that prosperity is more equally distributed to counter a rising tide of insecurity and anxiety.  Britain is experiencing its first “lost decade” of economic growth for 150 years, Mark Carney has warned.
In an extraordinary speech Monday in Liverpool, Carney says while central banks have been "the only game in town" since the 2008 financial crisis, it's now time for a "balanced mix of monetary, fiscal and structural policies" to promote inclusive growth.  In an extraordinary speech Monday in Liverpool, the Governor of the Bank of England called for stronger measures to confront inequality in order to stop more people turning their back on free market ideas and policies.
Carney says the British government must face the fact that free trade and technological developments are leaving some people behind, even as they increase global prosperity. This means that developed countries must redistribute some of the gains from these developments and retrain workers to succeed in the new economy.  Mr Carney said it is understandable that the public had come to associate globalisation with low wages, insecure employment, stateless corporations and “striking inequalities”.
The governor also used the speech to criticise aspects of globalisation and free trade. He said: “For free trade to benefit all requires some redistribution.”
He said “We meet today during the first lost decade since the 1860s. Over the past decade real earnings have grown at the slowest rate since the mid-19th century.
"Globalisation is associated with low wages, insecure employment, stateless corporations and striking inequalities.
"For free trade to benefit all requires some redistribution.
"We need to move towards more inclusive growth where everyone has a stake in globalisation.""We need to move towards more inclusive growth where everyone has a stake in globalisation."
While the picture in the UK is "complex", there are high levels of overall inequality, with "sharper disparities" emerging in recent years, Mr Carney said. Many people across the advanced world are "losing trust" in a system that did not "raise all boats", he added.
"When combined with low growth of incomes and entrenched intergenerational inequality, it is no wonder that many question their prospects," he said. His speech aimed to respond to critics of low interest rates and exceptionally loose monetary policy, which include Prime Minister Theresa May, with the defence that had the Bank of England not acted, the situation would have been worse.
On transitional Brexit arrangements, Mr Carney said the negotiations were unlikely to be concluded until the last minute and so businesses in heavily regulated fields would need time to adjust. Mr Carney  that it was wrong to argue that savers had been unfairly hit by low rates because the Bank's monetary policies since 2009 had lifted all asset prices, from house prices to stocks and shares.
In an interview with journalism students at the university, he said: "It's an issue, I think it's best explained, for heavily regulated sectors such as the financial services sector or let's say pharmaceuticals sectors - drug rules and patents and things. The thrifty saver and the rich asset holder are often one and the same,” he said, pointing to Office for National Statistics survey data showing that only 2 per cent of households have bank deposits worth more than £5,000 while also having no other significant financial assets and no house.
"The question is what happens at the end of those negotiations - some things will change, some will remain the same. “Has monetary policy robbed savers to pay borrowers? Has the MPC [Monetary Policy Committee] been Robin Hood in reverse? In a word, no”.
"Are businesses going to be able to take advantage of those changes, adjust to those changes overnight? The Governor acknowledged the economy was stronger than the Bank expected after the UK voted to leave the EU but he also warned that growth was increasingly led by consumption and a falling household savings rate.
"Because the way these negotiations work, everything doesn't come together until the last minute, in fact the last second. Last week, Andy Haldane, the Bank of England's chief economist, struck a similar note when he warned about Britain's widening inequality gap.
"The expression in trade deals is nothing is agreed until everything is agreed. Mr Haldane also defended  the Bank’s much-criticised monetary stimulus programme, stressing that it has delivered economic benefits to all regions of the country, not just London
"So the idea is that once everything is agreed, business would have a bit of time to restructure, reorient, invest and move forward."
PA