Northern Rock and Banking Reform

No, it was not because of greed. It was because it was necessary that they be encouraged to do so. There is a systemic imbalance in the world economy. In China, above all, and in a number of other countries, the willingness to save and lend far exceeds the willingness to borrow and invest—it is extraordinary in such a poor country. That surplus of savings requires the rest of world, if there is not to be a deflation, to borrow more and save less than they would otherwise do in order to match that imbalance. That is what has happened: an outflow of savings from China has financed a huge deficit in the United States and other developed countries. That is the precise reverse of what one might expect to happen between rich and poor countries.