Scarborough Evening News business reporter Laura Crothers interviewed Charles Bean – deputy governor of the Bank of England, who had been in Scarborough. During this exclusive conversation, Mr Bean, who is also a member of the Monetary Policy Committee, the group which sets interest rates each month, told Laura that we are facing "the biggest financial crisis in human history". Below is the interview in full.
What brought you to Scarborough?
The Monetary Policy Committee are having a week in Yorkshire. We visit regions in the UK throughout the year alongside our agents who are here full time. Once a year we have a group expedition out to a particular region. I started in Leeds, went to York, then came through to Scarborough. I was very pleased to come to Scarborough, people have been very hospitable.
Have you been to Scarborough before?
I used to come up here as a small child because my father's side of the family hail from Hull. I was brought up in the south, in Essex, but used to come and visit my grandparents. This is the first time I have visited Scarborough since then. A lot has changed, but certain parts are still recognisable.
How do you think Scarborough will benefit from its recent win in the Enterprising Britain competition?
That is really a feather in the cap for Scarborough. The renaissance project and the business people in Scarborough are clearly thrilled that they have won, and rightly so. It is good for the town to be put on the national map.
What have you taken away with you from your visit?
I have learnt a lot through talking to people about both local issues and also how developments in the wider economy are affecting them. There has really been a sense that perspectives have darkened some what, and that has come across clearly in some of the discussions I have had. But also it has been nice to hear some people saying they have not been affected yet, and that they are now being more cautious.
No-one can escape from the fact that we are facing a recession as it now seems to be everywhere we look.
In your view how serious is the cash crisis?
We have had banks crises in the past but what is unique about this event is its sheer scale. It is global. It originated in the United States but its tentacles have spread across the world.
Particularly in the last six weeks when financial markets really ground to a halt, and trust in the financial positions of a whole range of institutions have come into question. This is a once in a lifetime crisis, and possibly the largest financial crisis of its kind in human history.
How does it compare to recessions in the past?
In terms of impact on the real economy we are still in early days.
Compared to the early 1990s we are in a better position in that we are free to set monetary policy to try and stabalise the economy.
We have got more freedom than we had in the past. However it is reasonable to expect that we are now facing a period of relatively slow growth.
The availability of credit is going to be some what constrained going through the next year or two as banks try to get their balance sheets in better order.
What do you think is the best solution to this situation?
The key here is to get banks and other financial institutions into a position where they can resume normal lending. That does not mean going back to the sorts of lending that we saw in the early part of 2007 when credit was abnormally easily accessible.
The injection of excess capital, in particular by public sector, grants that the treasury are providing, and the extra liquidity the Bank of England is supplying to the banks, will help to achieve what is needed.
How long do you think it will take for the country's economy to stabilise?
I hope we are now seeing the beginning of the end of the crisis, that we have reached the lowest point and are now on a path to recovery.
It is not something that is going to happen over night because when trust in a financial counterpart is gone it takes time to rebuild that trust so it is reasonable to say that we are talking about many months, possibly as long as a year before we see a return to some sort of normality, but hopefully we are on a path which is improving rather than deteriorating.
What advice would you give to people at this time?
I am always very wary of giving advice to a group of people for the simple reason that individuals differ in their personal circumstances. What I would say though is be sensible with your money, and if you are concerned seek professional advice.
What or who do you blame for this financial crisis?
The turmoil has many causes. They include microeconomic developments, savings in Asia, perhaps monetary policy was too lose at the start of the decade. There have been falls in the over seas financial markets, particularly in the United States.
People taking credit rates as a guarantee rather than a guide was also to blame. It would be a mistake to point the finger at one particular thing though.
So is there any good news at the moment?
One bit of good news if the fact that commodity and oil prices have been coming down over the last couple of months and are expected to fall back more sharply next year.
This means household income, once you have taken away what is needed for necessities, will be higher meaning people will have more left over to spend on other things. Household income and energy consumption will get some support from that price fall at global level.