An apology to the British public

I'd like to apologise to the British people for my abject lack of faith in the populace. I thought a decade of easy lending had left us unable to cut back, and destined to just borrow more and more to fund our lavish lifestyles.

But it appears we are heeding the warnings that things are getting tough, and frugility is the order of the day. The British Bankers Association has had a lot of press this morning because there are not a lot of new mortgages being given out. But the less reported figure (less reported because there's no news like bad news) is that borrowing on overdrafts has gone down for the ninth consecutive month and, although there has been a small increase in borrowing on credit cards, the number of new purchases is lower and repayments are steady. At the same time, savings have increased.

So it's a gold star for the British public and I'm off to the naughty corner for being so darned cynical.

Returning to the mortgage point, I happen to disagree with Laura, who agrees with David Blanchflower that interest rates should be cut. Not changing interest rates is a brave step that takes guts and is not akin to doing nothing. What is often forgotten is the MPC's mission is to control inflation, which is merrily galavanting upwards. Let's not be spooked by a few people mentioning the 'R' word. Cutting rates = more spending = higher inflation = higher wages = even more inflation (now repeat ad nauseum). Now is not the time for a cut. So there.