David smith writes:
Sir Mervyn King, in Tuesday’s final regional speech as Bank governor, in Belfast, barely mentioned fiscal policy as a factor in the slow recovery. Instead, as well as the high-inflation squeeze on real take-home pay and the eurozone, he focused on another financial factor.
The problem, he said, was “the extent to which the balance sheets of the major UK banks had grown before the crisis hit, and had been financed primarily by borrowing.
“So the subsequent reduction in bank lending – the deleveraging – was greater here than in many other countries. That deleveraging has as its counterpart a reduction in the amount of (broad) money in the economy and a reduced willingness on the part of banks to expand lending.”
Read more at David Smith's EconomicsUK.com: Financial hangover is Britain's biggest growth headache.