A story about a man who (like me) keeps a ball on display in his office. Mervyn King has just been reappointed as head of the Bank of England:
Still an Aston Villa fan, King loves sports -- football, cricket, tennis. He played the latter with former U.S. Federal Reserve chairman Alan Greenspan. His speeches are also peppered with sporting metaphors. Most famous is his Maradona theory of interest rates, named after the Argentinian soccer player Diego, to illustrate how people react to what they think you are going to do rather than what you actually do. On a tour of India, he called it the Tendulkar theory after the sub-continent's cricket star, Sachin. King studied at Wolverhampton Grammar School, then Cambridge and later Harvard. Teaching at the Massachusetts Institute of Technology, he had an adjoining office to current Fed chair Ben Bernanke.
Bernanke and King have taken opposite approaches to the current liquidity problem in the credit markets. King remains focused on fighting inflation and has taken heat for not rescuing firms in trouble due to speculative positions gone bad. Bernanke appears less concerned with the moral hazard problem of a bailout, and is cutting rates in an attempt to forestall recession.
Despite being on opposite sides of a sharp divide, both Bernanke and King are receiving vitriolic criticism for their decisions. This is similar to a football coach, for example: whether you kick the field goal or go for it on fourth down, there will be critics baying for your head.
Sports nuts like us know that this is simply true. Maybe we should call it the Bernanke-King theory of criticism.