Sir Mervyn King, governor of the Bank of England, warned on Friday that stopgap measures to extend new loans to countries such as Greece, Portugal and Ireland would not solve the eurozone debt crisis. It’s good to see that at long last, Merv has started reading The Slog.

“Right through this crisis from the very beginning … an awful lot of people wanted to believe that it was a crisis of liquidity,” King opined today, “It wasn’t, it isn’t. And until we accept that, we will never find an answer to it. It was a crisis based on solvency … initially financial institutions and now sovereigns.”

Sir Mervyn’s views put him at odds with the ECB and eurozone governments which have extended hundreds of billions of euros in Greek, Irish and Portuguese bailouts in an attempt to solve the crisis.

And Sir Merv wasn’t sparing any blushes closer to home. As Chair of the FPC, he has called for an audit of UK banks’ exposure to the eurozone debt crisis, stressing that the debt problems of Greece and other countries posed “the most serious and immediate risk” to UK banks. The FPC called for banks to divert their profits towards building up their reserves against future losses.

Meanwhile, that old Fed “let’s sell some gold and confuse the crap out of everyone” strategy has made a reappearance. I maintain (as I have since 2006) that the Fed uses deep reserves now and then to stop the wholesale dash from stock markets to….well, gold actually. But now that bonds are preferred even to the shiny stuff, I have no idea what they’re up to.

For myself, with gold having slumped back to $1500, I shall be going back into it again. In the current environment, I think gold at that price is the bargain of the century. What you do is your own affair: but either way, buy the metal, not the paper. Paper gold from here on in is worth only how many cents you get on the Dollar after the bank collapses.

Enjoy the weekend.