Mervyn King urges patience as BoE pursues policies that haven't produced economic growth in Japan in 2+ decades

The Telegraph reports that the Bank of England's Mervyn King is urging patience as the BoE pursues the same policies that the Bank of Japan has pursued for 2+ decades without restoring economic growth.

Sir Mervyn King has urged “patience” on economic recovery as the Bank of England cut its growth forecasts and warned the crisis has a long way to go yet..... 

The Bank’s governor said it would likely take “a number of years” for Britain to fully recover from the crisis and left the door open to further stimulus efforts.

Since the Bank of England is implementing the same policies that the Bank of Japan has used for the last 2+ decades without Japan fully recovering from its crisis, it is safe to say that without a policy change England is looking at a minimum of 2 more decades without fully recovering.

No wonder he is asking for patience!

“We will get back but it’s quite impossible to know over what time period. It is to our Olympic team that we should look for inspiration. They have shown us the importance of total commitment when trying to achieve a goal that may lie some years ahead. 

“There is still a long way to go,” he added.

So long as the BoE pursues policies that are guaranteed to thwart an economic recovery, it is safe to say there is still a long way to go.

An example of how these BoE's policies thwart economic recovery is the pension fund/real economy death spiral.

In this death spiral, funds that are needed to promote economic growth are redirected to pay for pension obligations.  This is necessary as the money in pension plans is unable to earn a risk adjusted return or any return for that matter as a result of the BoE pursuing zero interest rate policies and quantitative easing to artificially reduce interest rates across the yield curve.

There is a policy that would quickly restore growth in England.

This policy would be to adopt the Swedish model and require that banks absorb all the losses on the excesses in the financial system today.

This policy was first tried in the US in the 1930s and it broke the back of the Great Depression.  This policy was then tried in Sweden in the 1990s and it ended their banking crisis.  Most recently, this policy was tried in Iceland and not only are is Iceland growing quickly, but its bonds were recently upgraded to investment grade.

Of course, pursuing the Swedish model means putting society before the banks.  Japan hasn't been able to do this in over 2+ decades.

Perhaps what is needed to get the BoE to explore policies that don't thwart economic recovery is to tie the payment of the pensions of the individuals on the monetary policy committee to economic recovery.  If it takes 2+ decades to recover, they should receive nothing for 2+ decades.