Professor Tim Congdon from the London School of Economcs said the contraction of eurozone credit was "extremely disturbing" but inevitable after moves in October to force banks to raise their capital ratios. "It was a catastrophic decision," he said.
If you insist that banks raise their capital ratios you are, inevitably, going to constrain the amount of credit they can offer….
3 responses so far ↓
1 Kit // Feb 24, 2009 at 11:19 am
At least they are being consistent rather than British governments yo-yo policy.
2 Gareth // Feb 24, 2009 at 1:12 pm
I’m sure it was just a handy coincedence that Governments happened to be ready and able to splash taxpayers’ money about in return for controlling stakes.
3 AntiCitizenOne // Feb 24, 2009 at 2:42 pm
At least the government are being consistent here. They are consistently doing the opposite of what they should be doing.
Raise reserves in credit expansion, lower into credit contraction.
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