As the global recovery limps along (and interest rates creep ever downwards), it seems increasingly clear that the policy of endless easing adopted by central banks here and in Europe and Japan has not had the effects its designers hoped for. Worse still, the world remains governed by the same framework that led it into crisis in 2008. Here, former head of the Bank of England Sir Mervyn King explains his bold new vision for central banking, one that accounts for the radical uncertainty of economic life and will help fight the risk still inherent in the system.
Octavian Report: In your new book The End of Alchemy, you develop an interesting theory: central banking as, rather than a lender of last resort, a pawnbroker for all seasons. Can you explain this concept and how you arrived at it?
Lord Mervyn King served as governor of the Bank of England and chairman of its Monetary Policy Committee from 2003 to 2013. His book The End of Alchemy was published this year.