Prolonged financial repression

At any point in time, the engine of economic growth depends on the strength of the four cylinders on which it is driven; the household sector, the banking sector, the government and the non-financial corporate sector.

The stability of each of these four cylinders will determine how healthy the overall economy is. If you have one cylinder impaired, then the economy can still progress. With two cylinders impaired, it becomes much harder. With three cylinders impaired, there is a major problem. In the UK, we have a major problem. The banking system is severely impaired, sitting on substantial bad debts and in many instances housed in the intensive care unit of the government sector. Banks do not want to lend because they are, justifiably, very risk averse having (technically) gone bust. The governme...