Mervyn King was doling out blame at the Treasury Select Committee today - while insisting there was nothing, at all, anywhere that the Bank of England could have done differently. He dumped on Brown, saying that Britain entered the recession "with a pubic deficit that was too high" so leaving less room for a meaningful splurge. I add in parenthesis that of the idea of borrowing in a boom would have appalled Keynes: this is why Brown's claims to be following Keynes now ring hollow. King also blamed the regulators, the banks - everyone, except the Old Lady of Threadneedle Street..
Perhaps wrongly, I was struck by King's assertion that banks should take a higher buffer of high-quality liquid assets: ie, it's time for RBS, HBOS etc to start to buy all that UK government debt notes just in case the Chinese and Arabs lose their appetite for it. It is entirely possible that the nationalised banks are directed to fund Brown's misbehaviour - thus saving him from the IMF. The below graph, courtesy of Citi, shows just how UK banks appetite for UK debt has been increasing already: