The former Bank of England boss has warned in a new book that another financial crisis is “certain”, and may come “sooner rather than later”.
Mervyn King, who stood down in 2013, says reform of monetary and banking systems may help prevent the crisis.
But he says that failure “to tackle the disequilibrium in the world economy makes it likely that it [a crisis] will come sooner rather than later”.
The life peer was bank governor during the global financial crisis of 2008-09.
Lord King, 67, headed the bank between 2003 and 2013.
‘Failure of a system’
In his new book, The End Of Alchemy: Money, Banking And The Future Of The Global Economy, serialised in The Telegraph, he says the 2008 crisis was the fault of the financial system, not individual bankers.
“The crisis was a failure of a system, and the ideas that underpinned it, not of individual policymakers or bankers, incompetent and greedy though some of them undoubtedly were,” he wrote.
To tackle the disequilibrium in the world economy, he suggests raising productivity as well as reforming the banking system.
“Only a fundamental rethink of how we, as a society, organise our system of money and banking will prevent a repetition of the crisis that we experienced in 2008,” he said.
He also says that global central banks are trapped in a “prisoner’s dilemma”, whereby they are unable to raise interest rates in case they derail economic recovery.