The story of the past three years has been a simple and worrying one. Bad central banking in the US, UK and Europe allowed banks to build up too much debt in the system, and then brought the bubble down by shifting too rapidly to tight credit conditions.
Once the authorities belatedly realised they had overdone the squeeze, they rushed to buttress the broken banks with state guarantees, subsidies and share investments. Now we are living through a period when the credit worthiness of some states is being questioned. Markets fretted the Irish banks were too large for the Irish state to support, in a re-run of the Icelandic horrors. We are also living through a fairly normal upturn from a deep recession. Restocking and some improvement in final demand on both sides of the Atlantic has seen growth resume in the US, Germany, UK and France....
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