Oecd: Uk must ensure lending not held back by

inspector_monkfish

10:00 29Jun09 OECD: UK MUST ENSURE LENDING NOT HELD BACK BY WEAK BANKS
10:00 29Jun09 OECD: UK POLICY SHOULD FOCUS ON SOUND FINANCES, LABOR MKT
10:00 29Jun09 OECD: UK GOVT MUST ADDRESS PRODUCTIVITY CHALLENGES

LONDON--The U.K. government should consider more radical measures to ensure the revival of bank lending, the Organization for Economic Cooperation and Development said in a report Monday.

The OECD also said U.K. economic policies should focus on restoring sound finances and on efforts to bolster the labor market by preventing the emergence of long-term unemployment.

In its U.K. economic survey, the OECD said the key to a solid U.K. recovery from the current "severe recession" is the easing of credit conditions and increased lending by banks and others.

It noted the considerable steps already taken by the U.K. government to support the banking system but said policies may need to go further.
"It is essential that the supply of new lending is not held back any longer by banks with insufficient capital to meet losses," the OECD said.

The organization said that "where institutions are unlikely to be viable, even with substantial assistance," the U.K. should consider using its Special Resolutions Regime for failing banks to transfer ownership of assets to a third party or temporarily nationalize them.

It also said that full nationalization of institutions with substantial government stakes may also strengthen the government's hand in reviving lending.

The U.K. government has injected billions of pounds of taxpayer money into leading banks and provided insurance against losses on toxic assets. While it has nationalized several smaller institutions, the government has tried to steer clear of full public ownership.

In its report, the OECD also said the U.K.'s potential growth rate had fallen because of the recession and because of the economy's dependence on the troubled financial sector.

It said the U.K. needed to find ways to improve productivity to offset the declines. Measures included improved public infrastructure, reforms to planning procedures for land use and raising training and education levels.
Last week, the OECD predicted the U.K. economy would contract 4.3% in 2009, with the economy stagnant in 2010.

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inspector_monkfish wrote: »

In its U.K. economic survey, the OECD said the key to a solid U.K. recovery from the current "severe recession" is the easing of credit conditions and increased lending by banks and others.

It really does beggar belief when the only answer that economists have to a recession caused by cheap and lax lending/borrowing is to continue to do the same thing. Unbelievable

May I suggest that the best thing for a long and sustained recovery is to pay down the gargantuan debt that has built up, both publicly and privately, it's going to hurt, but take a look at the DFW board, it's either that or bankruptcy, and bankruptcy is not really an option for the country has a whole.

Unless you are absolutley certain that you can pay back what you borrow, debt is always a bad thing, unless of course you say what Labour like saying and change the word 'debt' into 'investment', then everything will be hunky dory.:rolleyes:

Wookster

It beggars belief that some people (mostly the bulls) believe its going to work!

kennyboy66_2

ad9898 wrote: »

Unless you are absolutley certain that you can pay back what you borrow, debt is always a bad thing, unless of course you say what Labour like saying and change the word 'debt' into 'investment', then everything will be hunky dory.:rolleyes:

I'm afraid that this is the economic equivalent of the Taliban.

Without lending with risk, the UK would not have once had the biggest Merchant Navy in the world, would have no canals or railways & we would still be living in mud huts.

kennyboy66_2

Wookster wrote: »

It beggars belief that some people (mostly the bulls) believe its going to work!

It beggars belief that some people think that the solution to these economic problems is for companies not to be able to borrow money.

Graham_Devon

So how can we get more radical, helicopter strategy? Or just more QE?

QE has not worked, it has got to the banks, then stopped.

I'm not sure how we can get more radical without some seriously desperate debt creating measures.

All the OECD seems to be saying is that we should nationalize the banks. Have they not looked at Northern Rock and seen that nationilising it has made no difference to lending?

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kennyboy66 wrote: »

It beggars belief that some people think that the solution to these economic problems is for companies not to be able to borrow money.

Ok, maybe my comment was a little over the top, however there is a balance between borrowing and paying back debt, In my opinion, what has happened in the bubble years has caused the current economic conditions, so therefore the balance was way, way out, that balance now has to be addressed, and it's going to hurt, especially after the election.

FWIW, I have just heard on the radio that Labour are not going to announce public spending plans until after the election............ funny that isn't it.:rolleyes:

ruggedtoast

But money can only be created by lending, and unless you lend at zero percent interest (Gordons trying) the money required to pay back the loans is always greater than that which exists. Meaning you need more lending.

Neato!

chucky

Graham_Devon wrote: »

So how can we get more radical, helicopter strategy? Or just more QE?

QE has not worked, it has got to the banks, then stopped.

I'm not sure how we can get more radical without some seriously desperate debt creating measures.

by securing the banks balance sheets - there must be still holes in some of the banks balance sheets for the markets not be more liquid.

maybe regulating the the capital structure of banks is the solution :think:

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ruggedtoast wrote: »

But money can only be created by lending, and unless you lend at zero percent interest (Gordons trying) the money required to pay back the loans is always greater than that which exists. Meaning you need more lending.

Neato!

This is the great economic paradox, nothing can be infinite in a finite world......... so the question is 'What is going to happen eventually', and have we reached 'eventually', now ?

Successive governments across the world have kept kicking this 'ball' further and further into the long grass, with each kick the adjustment required to 'get the ball' becomes more and more severe, until you reach the point that the adjustment cannot be made and the only thing to do is 'keep kicking' untill you can't kick it anymore.

Which brings us back to the original point, nothing is infinite in a finite world.

Rochdale_Pioneers

ad9898 wrote: »

Ok, maybe my comment was a little over the top, however there is a balance between borrowing and paying back debt, In my opinion, what has happened in the bubble years has caused the current economic conditions, so therefore the balance was way, way out, that balance now has to be addressed, and it's going to hurt, especially after the election.

I'm interested as to your viewpoint on the effects in other countries who haven't done as we have done. I can point to countries like Spain and Germany, whose banking was under much tighter state control, whose debt did not increase over the mid noughties. They haven't had a Brown-style regime of financial regulation, nor one of large-scale state investment, yet they find themselves deeper in this mess than we are. In Germany's case they have more debt than we do as well.

What do you think caused their economic conditions to look so similar to ours. I read repeatedly how whats happened here is Brown's fault. What about elsewhere? What - in doing basically the opposite of we did - did they get wrong which has led to them managing to replicate whats happening here?

This isn't - as no doubt some of you will claim - an attempt to blame everyone but Brown. Quite patently we have done a lot of things wrong in the UK. My point is that these things cannot logically be to blame for "economic conditions" as you put it, as those conditions can be found almost identically in countries who didn't follow Brown's model. Something else logically has been the key driver which has impacted everywhere regardless of models of state regulation, national debt and public spending.

Do you give such things any thought? Or does "blame Brown" override the facts, sanity and logic?