The recession is over, but there are still many lessons to be learnt from it.
Charles Bean, Deputy Governor for Monetary Policy, finds the current financial trend both disturbing and positive. Some of the disturbing reasons include the fact that banks have to repair their balance sheet to accommodate the increase in credit supply. In the near foreseeable future, there is likely to be an increase in the loan amounts that are given to businesses and households. And thanks to the housing boom, many young people today are carrying a huge debt amount on their shoulders.
Another disturbing factor is that the fiscal deficit will become unsustainable in the medium term, which will result in the government either cutting its spend or increasing the tax.
On a positive note, Charles Bean finds a substantial policy stimulus still working through the economy. With the bank rate at an historic 0.5%, banks have been able to purchase £200 billion worth of assets.
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