Spencer Dale begins by reviewing the synchronised nature of the global recession, noting that it was driven by tight credit conditions, amplified by a collapse in confidence. He says that: "The fall in household and firms' confidence proved mutually reinforcing and, to some extent, self-fulfilling: both households and firms expected conditions to weaken sharply and both cut back on spending." He adds that this withdrawal further exacerbated the weakness in the banking system, which threatened to feed back and extend the retrenchment. In such situations, he says, ".it falls to policy to break the ensuing vicious cycle".
Published on
02 December 2009
Press release