Daily Archives: March 15, 2012

Claire Jones

British householder, the time for chastisement is over.

The banking system’s woes are not your fault. You did not borrow too much in the run-up to the crisis. And neither is the recovery dependent on a fall in your debt.

So says Ben Broadbent, external Monetary Policy Committee member, in an interesting speech in the City of London today. (The FT’s economics editor Chris Giles has taken a similar view here).

According to Mr Broadbent, the banking system’s problems are instead the result of rampant expansion in overseas lending, which increased five-fold in the decade leading up to the crisis.

Mr Broadbent’s argument was convincing. But, if he is right, then quantitative easing in the form of gilt purchases makes little sense.

Though Mr Broadbent did not advocate this, his argument suggests that the economy would recover faster if the Bank did something akin to the European Central Bank’s three-year longer term refinancing operation rather than QE. Read more