Commentators refer to greater confidence among delegates that things are on the mend. Maybe, but mended may not mean fixed.
George Soros’s think tank head hit the key point, when he said that the banks should not be allowed to fuel another economic boom and that we may have to accept a lower level and a more gradual growth of economic activity to avoid another crisis. George Osborne said in his speech he was looking for ‘sustainable growth’. He is right. He went on to call on the banks to lend more. Here he was wrong.
Growth based on borrowing leads to bust. The banks, used their own version of quantative easing by creating worthless or inflated assets to trade in, or borrow against. This fueled asset inflation and created massive debt. If banks keep lending against property assets, the price goes up, producing equity for more borrowing. The flood of borrowed money pushes prices up still further. It is the same, in economic terms, as printing money. If we cannot see this, or will not, it because we are either daft or reckless. In the year 2000 the banks held deposits more or less equal to their lending. By the crash the banks had borrowed over twenty times the value of their deposits.
When the whistle blew, the system went into meltdown. This was because, when the call went out for real money as a measure of actual wealth, there was none. We cannot go there again.