The Great Debate UK
from UK News:
Deciding it was safe to come clean because banks are now on a more even keel and the worst of the credit crisis is behind us, the Bank of England has told the nation that at the height of the turmoil it secretly lent Royal Bank of Scotland and HBOS a colossal £62 billion, which is more than the entire British defence budget.
Both banks faced the imminent closure of high street cash machines and the curtailment of normal banking operations across the country.
The Bank said "this was a dire emergency" and Downing Street called the secret lending of taxpayers' money in the Autumn of 2008 "a powerful reminder of how close the banking system came to near collapse."
In Westminster, some MPs were flabbergasted, even though the loans have now been repaid.
Mervyn King, Governor of the Bank of England, sees a long, hard road back to the path we thought we were on before the financial crisis broke. Just how long is shown by Chart 2 in Wednesday's Quarterly Inflation Report. The Bank's Monetary Policy Committee does not expect Britain's GDP to return to its peak, 2007, level until 2011, and there's an outside chance that even in 2012, the country's output will be no more than it was in 2006.
This "considerable period" of "sustained weakness of demand" is why the MPC's other fan chart, the "rivers of blood" projections of inflation, looks so benign. The best guess (sorry, "central projection") is plumb on the 2 percent target for the CPI in 2012. We all know, said the Governor, that inflation is going to jump in January, thanks to the combination of dearer fuel and rising VAT, but after that, it should slide gracefully back, wobbling around the target for the next three years.