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June 09, 2014



One thing worth noting is that the UK is a special case - we're apparently useless at productivity improvement inside firms. The figures for S. Korea and Germany suggest that market entry/exit doesn't have to be the only motive force.

Problem with the CBI surveys, credit has been constrained for manufacturers for so long that they don't even realise how easily by comparison competitors in other parts of the world (e.g. Germany) can get bank financing... that means they blame other factors...

Mind you, generalised lack of demand remains a problem. The businesses I'm involved (B2B ones) in are still doing most of our business in the USA - the UK is a dead zone for corporate investment... consumer spending is bubbling along in some sectors, but manufacturing is typically only partially B2C...

Frances Coppola

I'm not arguing that we should not have an effective banking sector. Nor am I necessarily arguing that we should not repair banks, though I do wonder if some of our present ones are beyond repair. I'm saying that damaged banks take time to heal, and while they are healing some other distributional mechanism is needed. Damaged banks are rubbish at capital allocation - in fact banks generally aren't all that good at capital allocation, but damaged ones are much worse. Unfortunately there is no quick fix that restores lending to higher-risk borrowers such as SMEs. Apart, that is, from a state investment bank.

There is also the problem that we have not written down excessive household and corporate debt from before the crisis, and while that remains the case it is difficult to see how lending alone can be an effective mechanism for creating and distributing the means of exchange.


Having worked in banks, lending constraint has nothing to do with an absence of investment opportunities, but the lacks of skills to spot them - and the risks involved in them.

Lending has become the least regarded of activities by banks and if they could completely computerise lending (it's already partly computerised - just look at the comment by the TSB Head a few months ago when asked about lending) they would automate it.

Luis Enrique

I do to know what distributional scarcity of money means. Who isn't spending because they lack access to money? This is a different thing from people not spending because they are too poor or because they wish to pay off debts or accumulate savings. That could be solved by redistribution of income or wealth, and is nothing to do with money per se. If you gave me equities or bonds or wrote off my mortgage I'd spend more, but access to money is not something I worry about. Helicopter drops make recipients better off, their efficacy needn't have anything to do with scarcity of money.

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