There has been fierce criticism of the EU for making matters worse by forcing lenders to raise core tier one capital ratios to 9pc by the end of this month, a move widely blamed for tipping the eurozone back into slump.
Global regulators signalled a change of course yesterday, exploring ways to broaden the range of assets that count as liquid reserves. Critics say the whole policy of regulatory overkill should be abandoned until recovery is secure.
As in, you cannot expand bank lending and thus credit and the money supply, at the same time as you are insisting that banks double or triple their capital margins.
It\’s just not one of those combinations available to you.
Generals and last war all over again. Yes, the capital fragility of the banks was a problem. Almost certainly will be in hte future as well. But currently we\’ve an entirely different one: that shrinking money supply.