It must be a strange experience, being a central banker these days. Ever since the financial crisis of more than a decade ago, central banks have had to reconcile two opposing goals — both of them self-imposed.
If you’re like me, you’ve certainly wondered why economic growth has been so sluggish after the worst post-war recession — the Great Recession, or Great Financial Crisis as some have callednthe 2007-2009 crisis. Normally, the economy should have surged, after such a deep slump.
Instead, we’re proud of economic growth figures around 2% in Britain and the US and cheer when the eurozone posts a meager GDP advance of above 1% almost a decade after the crisis.
The story on the need to bail out households just like we bailed out the banks has sparked some controversy. To some extent, this was to be expected – but the truth is that forgiving household debt is the only real way out of the crisis.
Indebted households in the UK and more widely need a bailout just like the financial sector got one, in order for the economic recovery to take root, according to Dr. Johnna Montgomerie, lecturer in economics at the Political Economy Research Centre (PERC), Goldsmiths University of London.