How government and the Bank of England exacerbated the credit crunch

The credit crunch is global. So why has there only been a run on the banks in Britain? Alistair Darling suggests Northern Rock is a mere domino in a chain which started in America. But John Redwood’s blog points out that the first domino was knocked over by the clumsy fingers of the Labour government. Only in Britain did the central bank refuse to boost liquidity by lending at a non-penalty rate (unlike the ECB, the Fed, the Norwegians, Swiss, Russians etc).
 
The next bit sounds nerdy, so was the ERM crisis so stay with me. Exacerbated by the BoE’s intransigence, the de facto cost of bank borrowing, three-month LIBOR, has risen from 6% to 6.85%. These costs will be passed on to customers. People are about to feel the pain of a problem which could have been assuaged by better judgement at the Bank of England and more vision from our ministers who failed to realise what would happen.