The banks are stifling any recovery because they will not lend to households and businesses, so says the Bank of England (BoE).

'Weak lending is more likely to dampen the recovery in activity. For example, an increase in the cost of credit would push down investment spending.' It says.

The banks claim that there has been a fall off in demand for loans but the BoE report says that lenders have tightened credit far further than any drop in demand. The result is that there is still a demand led imbalance in the credit chain and that has allowed lenders to push margins up so maintaining profits with fewer loans.

George Osborne has already given bank lending a priority position on his 'watch-list' and has also tied the incoming Lloyds chief leding targets to get any bonus. So this will not come as welcome news to the government.

Vince Cable has also pointed out that some lending conditions are so difficult to meet that many no longer bother asking for loans.

But the banks are not lending because it is not in their interests to lend. They operate within the rules laud down by government. Government cannot then come along and force people the banks to make bad business decisions within that framework.

In fact, by forcing one bank to lend by the use of bonuses for the chief executive is lust as much likely to skew the market as anything else.

It is now widely agreed that loose lending got us unto thus position, but now that the banks start to ask the serious questions of borrowers they should have been asking all along, we all want them to go back to the give it away days.

The situation may well have rebounded too far but a quick look back over history shows that this always happens. We should accept it. Be assured that when we eventually put this behind us we will soon forget and the same thing will happen again and again on smaller and (hopefully not) larger scales into the future.

And every time will come that age old mantra – 'we've learnt our lessons, it's different this time'.

Maybe we need to look again at opening local stock exchanges despite the cool reception Vince Cable got for this idea earlier in the year. At least it might get some money flowing into business.

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